IEA says Covid vaccine ‘likely won’t come to the rescue’ of oil market for some time

LONDON – The International Energy Agency (IEA) on Thursday lowered its forecast for global oil demand for 2020 and said it did not expect the prospect of a coronavirus vaccine to increase demand considerably “until well into the next year”.

In its latest closely watched monthly report, the IEA said it now expects global oil demand to contract by 8.8 million barrels per day this year. This reflects a downward revision of 0.4 million barrels from last month’s estimate.

Paris-based energy agency slashed short-term outlook on weak historical data and a resurgence of Covid-19 cases in Europe and the United States

For 2021, the IEA said growth in global oil demand will increase by 5.8 million barrels per day, an upward revision of 0.3 million barrels from last month.

Oil prices have posted three consecutive trading sessions of gains since Pfizer and BioNTech said on Monday early results showed their vaccine candidate to be over 90% effective in preventing Covid infections.

It is hoped that a safe and effective vaccine could help end the coronavirus pandemic that has claimed more than 1.28 million lives worldwide.

Huge challenges remain before a Covid-19 vaccine can be deployed, but oil markets have applauded the news, hoping it could lead to increased demand for energy in the months to come.

“However, it is far too early to know how and when vaccines will restore normal life. At this time, our forecasts do not foresee a significant impact in the first half of 2021,” the IEA said.

International benchmark Brent futures traded at $ 43.66 a barrel Thursday morning, down about 0.3%, while US West Texas Intermediate crude was at $ 41.33 , or about 0.35% less.

The latest IEA report comes shortly before an energy alliance of some of the world’s most powerful crude producers meets to discuss the next phase of oil production policy.

OPEC and non-OPEC allies, known collectively as OPEC +, are expected to hold talks on December 1.

Faced with a still lackluster global demand for oil, the group had accepted a record reduction of 9.7 million barrels per day from May 1. The cut was then reduced to 7.7 million in August, and OPEC + announced its intention next year.

“With a Covid-19 vaccine unlikely to come to the rescue of the global oil market for some time, the combination of weaker demand and growing oil supply provides a difficult backdrop for the meeting of OPEC + countries, “the IEA said.

“Unless the fundamentals change, the task of rebalancing the market will progress slowly.”

OPEC lowered its forecast for global oil demand for the rest of this year and 2021 on Wednesday, citing weaker-than-expected economic prospects and an upsurge in coronavirus cases.

The 13-member producer group said it expects global oil demand to contract by 9.8 million barrels per day year over year in 2020, before increasing by 6.2 million. barrels on an annual basis next year.