Opec slashes oil demand forecast by 300,000 bpd in 2020 and 2021

Big oil may face more obstacles and environmental protection restrictions under the administration of US President-elect Joe Biden. AFP

Opec revised its oil demand forecast for this year and next lower by 300,000 barrels per day as mobility restrictions increased in the US and Europe due to a second wave of Covid-19 cases.

Global oil demand is set to shrink this year by around 9.8 million bpd year-on-year - compared with previous projections of 9.5m - with growth of 6.3m bpd expected in 2021, which is also 300,000 bpd less than forecast a month ago. Overall, oil demand for this year is expected to average 90m bpd.

Total global demand next year is expected to reach 96.3m bpd, with the transportation and industrial fuel demand to remain sluggish until 2021.

"These downward revisions mainly take into account downward adjustments to the economic outlook in OECD economies due to Covid-19 containment measures, with the accompanying adverse impacts on transportation and industrial fuel demand through mid-2021,” Opec said in its monthly market report for November.

The group revised lower its expectations for OECD countries by 500,000 bpd month-on-month due to the enforcement of a second-wave of lockdowns across Europe, notably in France and the UK, to contain another outbreak of Covid-19.

Restrictions in the US, which is seeing cases surge past 10 million, is expected to see “lower-than-expected demand” in the transportation sector in the third quarter of 2020, with continued slower demand for the remainder of the year.

Non-OECD recovery was revised upwards by 200,000 bpd, bringing the overall demand decline for the region to 4.5m bpd. The upward revision on the non-OECD demand forecast was bolstered by rebounding economic activity in China, as well as improving industrial activity indicators and growth in the petrochemicals sectors.

On Tuesday, the International’s Energy Agency's executive director said global oil demand will not peak even after a post-pandemic economic recovery spurs a revival of 100 million barrels per day of demand.

The agency forecast a decline in this year's global energy demand of about 5 per cent – seven times larger than the decline after the 2008 financial crisis – after coronavirus-induced movement restrictions dampened demand for fuel.

Paris-based IEA also said energy investment levels around the world will decline by 20 per cent from a year ago.

Brent climbed above $45 per barrel for the first time in 10 weeks during intra-day trading on Wednesday. The international benchmark was up 2.11 per cent, trading at $44.53 per barrel at 5.29pm UAE time, while West Texas Intermediate, the key US gauge was up 2.13 per cent at $42.24 per barrel.