Oil demand to recover gradually in 2021, UAE energy minister says

Emirates does not see a cause for concern about the new mutant strain of the Covid-19 virus, Suhail Al-Mazrouei says

Suhail Al Mazrouei, UAE's minister of energy, is optimistic about a recovery in oil demand in 2021 but says it will be gradual. Victor Besa/The National

The UAE is upbeat about oil demand recovering in 2021 but expects the rebound to be gradual, the energy minister of Opec's third-largest producer said.

The global distribution of Covid-19 vaccines and easing in trade tensions between the US and China are reasons for optimism about an improvement in demand for oil, Suhail Al Mazrouei told Sky News Arabia on Thursday.

"We see that 2021 will be a year of recovery," he said. "However, the recovery in demand will be gradual and will not be in a quarter or two."

The rollout of vaccines will be a positive contributor to the recovery of major economies, while an improvement in US-China trade relations could bolster oil demand by major economies such as China and India, he said.

Goldman Sachs forecasts Brent, the international benchmark for oil, could hit $65 a barrel by the end of next year, while Standard Chartered projects a price of $44. After rallying to above $51, oil prices have receded somewhat from their October highs on concern a mutation of Covid-19 discovered in the UK could speed transmission of the virus and lead to more lockdowns across Europe that could hit oil demand.

Brent was trading at $50.83 at 5.27pm UAE time on Thursday, while West Texas Intermediate, the gauge for US oil, was trading at $47.77.

Despite the emergence of a mutant strain of the virus, it is not a cause for concern, Mr Al Mazrouei said.

"The global health sector can co-operate and find solutions for this virus," he said.

Opec+, the alliance of oil producers led by Saudi Arabia and Russia, through its agreement for production cuts has helped the market during the period of reduced demand, he said.

Earlier this month, Opec revised down its oil demand forecast for 2021 by 350,000 barrels per day but left its assessment for this year relatively unchanged, as it factored in uncertainty over the impact of Covid-19 on transportation fuels.

Global demand for 2021 is estimated to increase slightly due to the possible slowdown in demand for fuel in the first half of the year in OECD economies.

Overall demand for 2021 is estimated to be 96.89m bpd, marginally higher than a projected 89.99m bpd for this year, Opec said.

The UAE hopes that more oil-producing countries will join the alliance in future, Mr Al Mazrouei added. The UAE accounts for 4.2 per cent of global oil output, according to BP’s Statistical Review of World Energy.