OPEC Expects Slow Recovery in Oil Demand by 2021

OPEC said on Wednesday that global demand for oil will recover more slowly in 2021 than previously due to the rise in coronavirus cases, curbing efforts by the organization and its allies to support the market.

Demand will rise by 6.25 million barrels per day (bpd) next year to 96.26 million bpd, the Organization of the Petroleum Exporting Countries said in a monthly report. The growth forecast is 300,000 bpd less than expected a month ago.

The Organization of the Petroleum Exporting Countries said in a monthly report that demand will rise 6.25 million barrels per day next year to 96.26 million bpd, expecting 300,000 bpd, lower than expected a month ago.

The OPEC report said that European governments' moves to close restaurants and encourage work from home will hurt fuel demand for the rest of 2020, with the pandemic's impact on the oil market continuing until mid-2021.

OPEC said in the report: "The recovery in oil demand will falter severely, and it is now assumed that the slowdown in transport and industrial demand for fuel will continue until mid-2021."

This is the last report before the OPEC+ advisory committee meeting next week and the policy meeting on November 30 and Dec. 1.

Oil surged this week and hit a more than two-month high above $45 a barrel after drug companies Pfizer and BioNTech said their treatment for COVID-19 was 90% effective in preliminary test results.

OPEC said that "an effective and widely distributed vaccine" could support the economy in the first half of 2021.

However, the organization lowered its forecast for demand growth in 2021 from 7 million bpd in July. OPEC also cut in the report its estimate of a contraction of oil use for this year to 9.75 million bpd from 9.47 bpd.

Despite continued strong compliance with supply restrictions it pledged, the report also showed production surging, another headwind for OPEC+.

OPEC said its production increased 320,000 bpd to 24.39 million bpd in October, driven by a recovery in Libya, which is exempted from cuts.

The Organization expects demand for its crude to drop by 600 thousand bpd, compared to 2021 estimates at 27.4 million bpd, allowing the average OPEC production to rise next year.

However, upcoming meetings will focus on whether OPEC+ should increase supplies by 2 million bpd from January. OPEC+ has already cut production by 2 million bpd in August from 9.7 million bpd in May.

Saudi Arabia, OPEC's largest producer, said on Monday that the deal could be revised, and OPEC sources say there are different options on the horizon.

Meanwhile, OPEC SG Barkindo participated today in the Ministerial Roundtable of the World Economic Cooperation Forum on natural gas under the title "Natural gas in a post-Covid-19 world". The virtual event was co-hosted by the Algerian government and the GECF.

[caption id="attachment_170971" align="alignnone" width="960"] OPEC SG Barkindo participats in the ministerial virtual meeting[/caption]

Barkindo noted that natural gas will be the fastest growing fossil fuel between 2019 and 2045, with rising demand driven by rising levels of urbanization, industrial expansion and increasing competitiveness over coal for power generation.

As for the impact of the pandemic on the global gas market, the Secretary-General indicated the timely response of gas companies in reducing supplies of natural gas and LNG to avoid oversupply in the market.