An employee is holding a fuel pump at a gas station in Shah Alam, Malaysia on Tuesday, January 12, 2021.
Samsul Said | Bloomberg | Getty Images
LONDON – The International Energy Agency on Tuesday lowered its forecast for global oil demand for 2021, citing rising Covid-19 cases and renewed lockdown measures that will further restrict mobility.
The IEA said it now expects global oil demand to rebound by 5.5 million barrels per day to 96.6 million this year. That reflects a downward revision of 0.3 million barrels from last month’s assessment and follows an unprecedented collapse of 8.8 million barrels per day last year as the coronavirus pandemic ravaged global oil markets.
The IEA’s latest oil market report comes as countries continue to implement strict public health measures in an effort to curb the spread of viruses, with lockdowns imposed in Europe and parts of China.
The Paris-based energy agency said oil demand growth is expected to decline slightly during the first three months of the year due to tighter government plans calling for additional travel restrictions.
This is expected to curb global mobility once again, prompting the IEA to lower its first-quarter forecast for oil demand growth to 94.1 million barrels per day. That would see oil demand return to levels nearly a year ago and reflect a downward revision of 0.6 million barrels from December’s oil market report.
“The global rollout of vaccines sets the fundamentals on a stronger trajectory for the year, with both supply and demand shifting back to growth mode after the unprecedented collapse of 2020,” the IEA said in its closely-reviewed report.
“But it will take more time for oil demand to fully recover as renewed lockdowns are depressing fuel sales in a number of countries,” he added.
Oil prices
Oil prices have soared in recent weeks, bolstered by optimism about the rollout of Covid vaccines and surprising oil production from OPEC kingpin Saudi Arabia.
However, the relatively slow rate of vaccination casts doubt on how quickly economies can recover.
International benchmark Brent crude oil futures traded at $ 55.26 a barrel Tuesday morning, up more than 0.9%, while US West Texas Intermediate futures were $ 52.51, up about 0.3%.
Both benchmarks fell more than 2.2% in the previous session, recording their worst daily performance since December 21.
Oil pump jacks, also called “nodding donkeys”, in an oil field of Rosneft Oil Co. near the village of Sokolovka, in the Udmurt Republic, Russia, on Friday, November 20, 2020.
Andrey Rudakov | Bloomberg | Getty Images
OPEC and its non-OPEC allies, an alliance sometimes referred to as OPEC +, cut oil production by a record amount in 2020 in an effort to support crude oil prices as strict public health policies coincided with a shock in demand worldwide to fuel.
OPEC + initially agreed to cut production by 9.7 million barrels per day, before cutting the cuts to 7.7 million and finally cutting back further to 7.2 million from January. The de facto leader of OPEC, Saudi Arabia, has since said it plans to cut production by an additional 1 million barrels per day in February and March to halt the build-up of supplies.
Last week, OPEC kept its 2021 forecast for global oil demand unchanged. The 13-member group expected demand growth to increase by 5.9 million barrels per day year over year to an average of 95.9 million.