Opec+ expects oil demand to remain at current levels well into the first quarter of next year but said there is “light at the end of the tunnel” after positive news on the development of a Covid-19 vaccine.
“It is clear that the global [distribution] of vaccine will take time and its effect will likely begin to be significantly apparent in the second half of 2021,” Abdelmadjid Attar, Algeria’s energy minister and chairman of the Opec conference, told delegates during an online meeting.
“That is why we must be aware today that the market condition of 2020 is likely to continue [until the] ... first quarter [of] 2021 and that we must be cautious.”
The group is holding a two-day annual meeting that will set the course of its production curbs policy until the end of the first quarter of 2021.
The 23-member alliance is widely expected to extend its current curbs of 7.7 million barrels per day for another three months.
However, the group is poised for a challenging meeting as some countries are reluctant to continue shouldering the burden of cuts at current levels.
It was initially set to ease restrictions to 5.8 million barrels per day from the start of the year.
A second wave of Covid-19 cases has concerned Opec+. The virus had infected more than 63.2 million people around the world as Monday, triggering another round of lockdowns in many countries.
The group also needs to deal with a surge in production from Libya, which brought 1.25 million bpd of output to the market since September, after the country ended a force majeure of about 10 months.
“With cases soaring in many regions around the world, it [the pandemic] continues to adversely affect the global economy, and consequently the world, [as well as] energy markets in an unprecedented manner,” Mr Attar said.
“The shock to the oil industry is massive. And its impact will likely reverberate in the years to come.”
Mr Attar acknowledged that the road to recovery would be long but was bullish about the chances of a potential rebound in global economic growth next year after positive news on the development of a vaccine.
A vaccine under trial by Moderna proved to be 100 per cent effective against severe cases of Covid-19 and the pharmaceutical company has applied for emergency authorisation in the US and Europe.
Moderna intends to make available about 20 million doses of the vaccine in the US by the end of the year, it said on Monday.
Oil continued to trade softly, with Brent, the most widely traded crude benchmark, down 1.29 per cent at $47.56 a barrel at 8.50pm UAE time. West Texas Intermediate, which tracks US crude, fell 1.08 per cent to $45.04 a barrel.
The benchmarks opened lower on Monday as initial reports suggested that Opec+ members have yet to agree on extending the current curbs for another three months.
“Oil prices are likely to be testy over the next few days and bounce off of competing headlines from the Opec+ meeting,” said Edward Bell, senior director of market economics at Emirates NBD.
Goldman Sachs said that Brent could hit $65 a barrel by the end of next year, while Standard Chartered projected a price of $44.