OPEC Revises Its Demand Forecasts for 2021

The Organization of the Petroleum Exporting Countries (OPEC) is expecting the global demand for crude oil to rise by 5.8 million barrels per day (b/d) in 2021, decreasing its previous expectations by about 100,000 b/d.

Extended lockdowns and the re-introduction of partial lockdowns in a number of countries has resulted in downward revisions to demand projections during the first half of the year (H1), according to OPEC’s Monthly Oil Market Report (MOMR) for February.

“At the same time, positive developments on the economic front, supported by massive stimulus programs, are expected to encourage demand in various sectors in H2 of 2021.”

The report noted that the base assumption for the near-term is that the Coronavirus pandemic will be largely contained by the second half (H2) of 2021.

“Current pandemic related challenges are considered to be temporary, as the distribution of vaccines is forecast to gain traction and this should lead to a recovery gaining pace towards the end of the second quarter (Q2) of 2021.”

Meanwhile, “economic growth during Q1 of 2021 is still forecast to be largely affected by the ongoing rise in infections, the consequent lockdown measures, and voluntary social distancing. Importantly, it is forecast that the recovery will be significantly supported by a rebound in contact-intensive sectors, especially in travel and tourism, leisure and hospitality,” the report noted.

In addition, the OPEC report noted that the improving outlook will very much be supported by pent-up demand that will be driven by relatively high forced household savings during the lockdown periods, especially in Western economies, as well as the large monetary and fiscal stimulus measures.

“The seasonal aspect of warm weather in the Northern Hemisphere and the travel season at that time will provide additional support. Rising investment will provide an additional pillar to growth as well.”

On the other hand, the report pointed to the new Coronavirus variants, and concerns that existing vaccines may be less effective against the new mutations, as the major risks to the expected recovery.

Positive developments were evident this year across major economies, specifically in the United States, which supported demand for petroleum products, particularly industrial fuels.

“The majority of this positive economic impact is assumed to gain traction during H2 of 2021.”

“However, this positive outlook was counterbalanced by expectations for a weaker recovery in transportation fuels in H1 of 2021. COVID-19 infection cases remain high in regions such as the U.S., Europe and Latin America, which has led to governments imposing new lockdown measures, or deepening existing ones, to help control the spread of the virus.”

“Additionally, a slower rollout of vaccinations is assumed to further delay herd immunity targets in some countries and regions, and the appearance of new variants in many countries has only added to the uncertainties. Nevertheless, stronger growth is anticipated from transportation fuels in H2 of 2021, based on the assumption that vaccination programs will help stem the spread of COVID-19 and that the announced massive stimulus programs will have a positive impact.”