The International Energy Agency (IEA) has revised its 2021 oil forecast, cutting oil demand by 0.3 million barrels, as governments around the world continue to impose lockdown measures amid a second wave of Covid-19.
According to the agency’s January oil market report, global oil demand is now projected to only increase by 5.5 million barrels per day (bpd) to 96.6 million in 2021, following an unprecedented decline of 8.8 million bpd last year. The IEA notes that oil demand growth was forecast to slightly decline in the first quarter of 2021, but after numerous governments imposed further lockdowns and travel restrictions, worldwide mobility will likely remain subdued for longer than initially anticipated.
As a result, the agency had to reduce its first quarter oil demand growth projections to 94.1 million bpd. The latest revision will put global oil demand closer to 2020 levels. “The global vaccine rollout is putting fundamentals on a stronger trajectory for the year, with both supply and demand shifting back into growth mode following 2020’s unprecedented collapse,” according to the IEA. “But it will take more time for oil demand to recover fully as renewed lockdowns in a number of countries weigh on fuel sales,” the agency concludes.
However, once higher demand for oil begins to materialize, supply will also begin to rise in 2021. The IEA anticipates that global oil supply will grow by 1.2 million bpd this year, after a historic decline of 6.6 million bpd in 2020. The agency assumes that by the second half of 2021, demand will substantially improve, but OPEC+ will continue to withhold the 5.8 million bpd of crude from the market as per the group’s agreement in April 2020. In the meantime, oil prices have slightly improved from their pandemic-induced lows, rising above $50 per barrel in the beginning of the year.
Information for this briefing was found via the IEA. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.