Opec cuts oil demand growth despite vaccine rollouts

Opec has revised down its global oil demand growth forecast for next year as a result of uncertainty surrounding the Covid-19 pandemic, despite the roll-out of vaccines in several countries.

It now forecasts that demand will rise by 5.9mn b/d to 95.89mn b/d in 2021. Last month it predicted that next year's consumption would grow by 6.25mn b/d.

The downward revision in Opec's latest Monthly Oil Market Report (MOMR) reflects the uncertainty surrounding the impact of Covid-19 on transportation fuels in OECD economies in the first half of next year. Opec estimates their recovery to be capped at 2019 levels. And forecasts for a mild winter in the northern hemisphere are pressuring the outlook for middle distillates demand, Opec said.

Economic growth next year and the related impact on oil demand recovery depends on uncertainties surrounding the pandemic, policies of the incoming US administrations, Brexit and trade negotiations, Opec said. Recent news regarding vaccination programmes in most major economies provides upside to next year's GDP growth forecast of 4.4pc, Opec said.

The UK became the first country to start rolling out the Covid-19 vaccine that US firm Pfizer has developed with Germany's Biontech earlier this month. Opec assumes vaccines will be gradually available globally by the second half of 2021.

"Earlier availability would allow a faster-than-anticipated move towards normalisation," the report said.

Lower transportation fuel demand in the US and OECD Europe led to a downward revision in Opec's demand forecast for 2020, which is now pegged at 89.99mn b/d, 9.77mn b/d lower than 2019. Last month's report predicted a 9.75mn b/d drop in this year's consumption.

On the supply side, non-Opec liquids has been revised lower for this year and for 2021. Non-Opec supply is now expected to average 62.67mn b/d this year, down by 2.5mn b/d from 2019. Last month's report estimated a 2.43mn b/d drop to 62.73mn b/d. This change reflects lower-than-expected output in the fourth quarter of 2020, mainly in the US, partially offset by revisions to output in Russia and Canada.

Non-Opec supply is forecast to rebound by 850,000 b/d to average 63.52mn b/d next year, a slower pace of growth than the 950,000 b/d increase predicted in last month's MOMR. "[This is] mainly due to downward revisions to Russia, following the new decision taken at the recent ministerial meeting of the Opec and non-Opec countries participating in the declaration of co-operation," the report said.

The trimmed non-Opec supply forecast for this year has resulted in an upward revision to the call on Opec members' own crude, which is now estimated at 22.2mn b/d in 2020, down by 7.1mn b/d from 2019. But the forecast call on Opec crude for next year has been revised down by almost 200,000 b/d from last month's report, to 27.17mn b/d.

Opec crude production averaged 25.11mn b/d in November, up by 707,000 b/d from October, according to an average of secondary sources including Argus.

Citing preliminary data, Opec said OECD commercial stocks stood at 3.145bn bl in October, down by 46.3mn bl on the month and 200.3mn bl above the latest five-year average.

By Rowena Edwards