Oil demand recovery likely to continue into 2022: Novak

World oil demand will continue to recover in 2021 but fall short of pre-pandemic levels before the end of next year, Russian deputy prime minister Alexander Novak said today.

Oil demand is still somewhere between 7mn-8mn b/d below pre-pandemic levels, Novak said. "We hope than in 2021 we will reach those pre-pandemic levels… [but] "we expect further growth of [only] about 5mn to 6mn b/d next year."

Novak, who still handles Russia's Opec+ portfolio despite his promotion from his former post of energy minister last month, was speaking just one week ahead of the 23-member producer group's next ministerial meeting on 4 January.

The meeting will be the group's first since it agreed last month to scale down a planned 2mn b/d output increase in January to just shy of 500,000 b/d and to meet once every month throughout the first quarter to decide on further adjustments beyond January.

The Opec+ group has said that further increases will be capped at 500,000 b/d each month, although several ministers, among them Saudi oil minister Prince Abdulaziz bin Salman, have said production cuts are also possible. Next week's meeting would be looking at policy options for February.

Novak said after the last Opec+ meeting on 3 December that he hoped the group would raise output by some 500,000 b/d in each of the first four months to reach the originally planned 2mn b/d cut by April.

The emergence of new, more infectious strains of the Covid-19 virus in Europe and other regions have since resulted in a host of new travel restrictions, dealing another potential blow to oil demand recovery.

Yet Novak last week said Russia would still support an increase in production [from 1 February] "if the situation is normal, stable." Novak said that the Opec+ group needs "to smoothly gradually reach those levels that were envisaged by the earlier agreement by 1 January in a way that does not jerk the market too much."

The current Opec+ agreement began in May 2020 and is due to run until the end of April 2022.

Prince Abdulaziz said earlier this month that the agreement was unprecedented both in its duration and in the amount of crude it has removed from the market since it came into force, pointing to the rise in oil prices since. Ice Brent front-month crude futures have been holding at above $50/bl since mid-December, up from below $35/bl in early May.

Novak today reiterated Russia's commitment to the Opec+ partnership, saying it will "continue cooperation" with its partners. But he opened the door to the possibility of an early termination of the agreement "if demand recovers more quickly, and the market recovers."

"The deal has been good not only for participating countries, but for the global oil market at large."

By Nader Itayim and Anastasia Krasinskaya