OPEC expects global oil demand to grow 6.6% in 2021 as economies open up post vaccinations

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The Organization of Oil Exporting Countries (OPEC) said it expects global oil demand to grow by 6 mb/d to around 96.5 mb/d on average for the year, an increase of 6.6%, as economies continue to reopen in the post-Covid 19 phase following expanding vaccination programmes.

“As with the economy, the market outlook for later this year looks especially promising.  In fact, we anticipate that demand will surpass 99 mb/d in the fourth quarter, which would put us back in the range of pre-pandemic level,” Mohammad Sanusi Barkindo, OPEC Secretary General, told the 30th Meeting of the Joint Ministerial Monitoring Committee.
 Overall, demand in countries outside the OECD should rise by nearly 6.8%, or 3.3 mb/d, this year, and by almost 6.4%, or 2.7 mb/d, in the OECD, a dramatic turnaround from last year when oil demand collapsed as the world shut down to control the spread of the pandemic.

Barkindo said OPEC’s latest projections show global GDP growth of 5.5% in 2021, up from an earlier estimate of 5.4%, driven by expectations for a robust second half of the year.

“China and the US continue to fuel the growth prospects for the year, with China’s economy on course to expand by 8.5% and the US by 6.2%. Despite the tragic second wave of COVID-19 in India, India’s economy is still expected to grow by 9.7%,” Barkindo told the meeting.

The Euro-zone, where there has been a gradual easing of strict lockdowns, should benefit from pent-up consumer demand and the beginning of the summer holiday season, he said, adding that growth in the Euro-zone this year is forecast at 4.2%.

However, he warned that this was no time for complacency. 

“As we know from experience over the past year, COVID-19 is a persistent and unpredictable foe, and vicious mutations remain a threat to both human health and the recovery. Furthermore, many leading economies are pumped up by record levels of fiscal and monetary stimulus, debt levels have soared, and inflation is beginning to rear its ugly head in some countries,” Barkindo said.

He said non-OPEC liquids production is now forecast to grow at a slightly slower pace than what was expected last month, rising by around 700,000 b/d in 2021 to an average of 63.6 mb/d. 

“In the US, liquids production is expected to dip slightly, to around 17.6 mb/d, despite the improving market conditions and demand prospects.  Both conventional and tight crude production are forecast to decline in the US, while NGLs and biofuel output are expected to rise.  In contrast to the US, liquids production is expected to grow in Canada, Brazil, China and Norway,” Barkindo added.

He said OPEC was keeping a close watch on OECD commercial oil inventories. April data showed a drop of 6.9 mb from the previous month, to 2.96 billion barrels. 

On the positive side, inventories have fallen by 250 mb from their peak of 3.2 billion barrels in the middle of 2020. OECD commercial stocks fell to 66 days in April, 12.3 days lower than the April 2020 levels, but still 3.9 days above the 2015-2019 average, he pointed out.

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