Opec lowers 2021 oil demand forecast

Opec has revised lower its oil demand growth forecast for this year, partly because it assumes the pace of recovery has been hit by elevated prices.

In its latest Monthly Oil Market Report (MOMR), published today, Opec pegs this year's world oil demand at 96.44mn b/d, up by 5.65mn b/d on the year but down by 160,000 b/d from its previous projection. As well as the recent price rises, it said the reduction was because of slower-than-anticipated third-quarter consumption in major markets India and China.

Opec kept next year's assumption for demand growth unchanged at 4.15mn b/d, taking demand to 100.59mn b/d, but warned of mounting economic challenges in China and the Covid-19 pandemic, which it expects to remain "a dominating factor" during the northern-hemisphere winter.

At last week's Opec+ meeting, the alliance eschewed calls from some consuming countries for a faster increase in production and stayed steadfastly behind its plan to raise collective output quotas by 400,000 b/d next month.

Today's report kept its forecast for non-Opec liquids supply growth this year unchanged at around 700,000 b/d, for an average 63.64mn b/d, and still sees next year growing by 3mn b/d next year. It expects Russia and the US to be the main drivers of next year's growth, but said investment levels, particularly in the US shale sector, remain a concern.

Taking into account lower demand, Opec decreased its 2021 forecast call on its own members' crude by more than 100,000 b/d to 27.65mn b/d, and by a similar amount next year to 28.66mn b/d. The group's output was 27.5mn b/d last month, up by 217,000 b/d from July, according to an average of secondary sources including Argus.

Citing preliminary data, Opec said OECD commercial stocks fell by 18.5mn bl in September to 2.81bn bl, which is 374mn bl lower than a year earlier and 163mn bl below the 2015-19 average.

"With these market developments, the countries participating in the declaration of co-operation continue their course… to gradually return the adjusted production volumes by 400,0000 b/d on a monthly basis," the MOMR said. Opec+ will next meet on 2 December to discuss the production policy into the start of next year.

By Rowena Edwards