Opec expects oil demand to recover in the second half of 2021

Opec+ is cutting 7.2 million bpd from the market, supported by a continued voluntary cut commitment of 1 million bpd by Saudi Arabia. Reuters

Opec expects demand for oil to rise in the second half of this year, driven by a broader global economic recovery, it said in its latest monthly market report.

Oil demand is projected to rise by 5.9 million barrels per day, with total consumption hitting 96.3 million bpd in 2021, Vienna-based Opec said in the report released on Thursday.

Estimates for the first half of the year were adjusted lower due to extended measures to control the spread of Covid-19 in parts of Europe as well as to account for higher unemployment rates in the US.

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"At the same time, 2H21 [second half of 2021] oil demand was adjusted higher to reflect an expectation of a solid economic recovery and the positive impact from vaccination rollouts," Opec said.

Demand from countries that are not part of the 37-member Organisation for Economic Co-operation and Development was encouraging, with "better-than-expected industrial fuel demand".

Opec revised it by 100,000 bpd on an annualised basis, supported by robust growth in the Middle East.

On the supply side, Opec production fell 650,000 bpd to average 24.85 million bpd in February, according to secondary sources cited by the group.

Opec+, the super group, which includes non-member producers including Russia agreed earlier this month to extend the current level of cuts into the next month.

The group will cut 7.2 million bpd from the market, supported by a continued voluntary commitment of 1 million bpd by Saudi Arabia.

The kingdom delivered its outsized cut, Opec data showed. Saudi Arabia's production stood at 8.15 million bpd in February, compared with 9.08 million bpd in the prior month.

Oil prices have surged amid tightening supply from Opec+ countries. Brent, the international benchmark, and West Texas Intermediate, which tracks US crude grades, are around 30 per cent higher than at the start of the year.

Brent was up 1.58 per cent, trading at $68.97 per barrel at 5.33pm UAE time on Thursday. WTI was up 1.44 per cent at $65.37 per barrel.