Oil demand recovery slower than anticipated: Barkindo

Opec's secretary-general Mohammed Barkindo said today that global oil demand is recovering more slowly than the organisation anticipated, but he refused to be drawn on whether this will affect the market's ability to absorb a planned increase in crude production from the wider Opec+ alliance next year.

Demand "is not picking up pace as we had expected earlier", Barkindo told the Energy Intelligence Forum. "Recovery will take longer than the [demand] shock," he added.

Opec forecasts that global oil demand will rise by around 6.5mn b/d next year, only partially offsetting an estimated drop of 9.5mn b/d this year.

Next year's rebound is based on a global economic growth forecast of 4.6pc, according to Opec's latest Monthly Oil Market Report (MOMR). It is also contingent on the availability of a Covid-19 vaccine, Barkindo said, adding that he is "hopeful" there will not be a repeat of the nationwide lockdowns that constrained demand in the second quarter of this year.

Barkindo hedged the question of whether the market can absorb an additional 2mn b/d of crude supply next year when Opec+ production cuts are due to be relaxed. "The maintenance of stability remains a fundamental aspect of our partnership with non-Opec," he said, adding that the alliance will remain "consistent".

The next ministerial meetings to decide Opec+ production policy will be held on 30 November and 1 December. The group will "take stock of this very eventful year" and this will "feed into the decision of our conference", Barkindo said.

A mechanism requiring member countries that have exceeded their output quotas to compensate with extra cuts has been "going smoothly" and is "working well", but predicting whether it will be extended beyond this year is "premature", he said.

Meanwhile, Barkindo expressed concern about upstream investment, which he said had fallen by 30pc this year. Over $12 trillion of investment will be required globally by 2045 to maintain current production capacity and meet demand growth, he said. Oil producing countries also "badly need" investment to boost downstream integration, he said.

By Samira Kawar