IEA Reduces Outlook for 2021 Demand on Renewal of Covid Lockdown Measures

LONDON – The International Energy Agency cut its forecast for global oil demand for 2021 on Tuesday, citing the surge in Covid-19 cases and the renewal of lockdowns that will further limit mobility.

The IEA has said it now expects global oil demand to recover from 5.5 million barrels per day to 96.6 million this year. This reflects a downward revision of 0.3 million barrels from last month’s assessment and follows an unprecedented 8.8 million barrels per day collapse last year as the coronavirus pandemic was hitting world oil markets.

The IEA’s latest report on the oil market comes as countries continue to implement strict public health measures in an attempt to curb the spread of the virus, with lockdowns imposed in Europe and parts of China.

The Paris-based energy agency said growth in demand for oil is expected to drop slightly in the first three months of the year following tougher government plans that call for additional travel restrictions.

This is expected to dampen global mobility again, prompting the IEA to lower its first-quarter forecast for oil demand growth to 94.1 million barrels per day. This would see oil demand return to levels of almost a year ago and reflect a downward revision of 0.6 million barrels from the December oil market report.

“Global vaccine rollout puts fundamentals on a stronger course for the year, with supply and demand returning to growth mode after unprecedented 2020 collapse,” the IEA said in its closely watched report .

“But it will take longer for oil demand to fully recover as new lockdowns in a number of countries are weighing on fuel sales,” he added.

Oil prices have rebounded in recent weeks, supported by optimism over the deployment of the Covid vaccine and a surprise cut in oil production from Saudi Arabia, the backbone of OPEC.

However, the relatively slow pace of vaccinations has cast doubt on how quickly economies will be able to recover.

International benchmark Brent futures traded at $ 55.26 per barrel on Tuesday morning, up more than 0.9%, while US West Texas Intermediate futures were at 52.51 $, about 0.3% more.

Both benchmarks fell more than 2.2% in the previous session, recording their worst daily performance since December 21.

OPEC and its non-OPEC allies, an alliance sometimes referred to as OPEC +, have cut oil production by a record amount in 2020 in a bid to support crude prices amid strict public health measures around the world. coincided with a shock in fuel demand.

OPEC + initially agreed to cut production by 9.7 million barrels per day, before easing cuts to 7.7 million and finally falling back to 7.2 million from January. OPEC’s de facto leader Saudi Arabia has since said it plans to cut production by an additional million barrels per day in February and March to prevent stocks from building up.

OPEC last week kept its 2021 forecast for global oil demand unchanged. The 13-member group forecast that demand growth will increase by 5.9 million barrels per day per year to an average of 95.9 million barrels.