A worker holds a fuel pump nozzle at a gas station in Shah Alam, Malaysia on Tuesday, January 12, 2021.
Samsul said | Bloomberg | Getty Images
LONDON – The International Energy Agency cut its forecast for global oil demand for 2021 on Tuesday, citing rising cases of Covid-19 and renewed lockdown measures that will further limit mobility.
The IEA now assumes that global oil demand will recover by 5.5 million barrels per day to 96.6 million barrels this year. This reflects a downward revision of 0.3 million barrels from last month’s assessment and follows an unprecedented collapse of 8.8 million barrels a day last year as the coronavirus pandemic hit global oil markets.
The IEA’s latest oil market report comes out as countries continue to adopt tough public health measures to contain the spread of viruses. Bans are in place in Europe and parts of China.
The Paris-based energy agency said oil demand growth is expected to slow slightly in the first three months of the year due to tougher government plans that include additional travel restrictions.
This is likely to further limit global mobility and prompt the IEA to cut its forecast for oil demand growth for the first quarter to 94.1 million barrels per day. This would bring oil demand back to last year’s level, reflecting a downward revision of 0.6 million barrels from the December oil market report.
“The global rollout of vaccines puts fundamentals on a stronger path for the year. Both supply and demand are returning to growth mode after the unprecedented collapse of 2020,” the IEA said in its closely watched report.
“However, it will take longer for oil demand to fully recover as new lockdowns in a number of countries weigh on fuel sales,” he added.
Oil prices have risen in recent weeks, aided by optimism about the introduction of Covid vaccines and a surprising cut in oil production by the OPEC kingpin Saudi Arabia.
However, the relatively slow pace of vaccination has cast doubt on how quickly economies can recover.
The international reference Brent crude oil futures were trading at $ 55.26 a barrel Tuesday morning, up more than 0.9%, while the US West Texas Intermediate futures were trading at $ 52.51 a barrel An increase of around 0.3%.
Both benchmarks fell more than 2.2% in the last session, recording their worst daily performance since December 21st.
Oil pump jack, also known as a “nodding donkey”, in an oil field owned by 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 to support crude oil prices as tough public health measures around the world came with a shock fuel demand collapsed.
OPEC + initially agreed to cut production by 9.7 million barrels per day, before slashing the cuts to 7.7 million, and finally reduced it further to 7.2 million from January. OPEC’s de facto leader Saudi Arabia has since announced that it will cut production by an additional 1 million barrels per day in February and March to prevent inventory build-ups.
Last week, OPEC kept its forecast for global oil demand unchanged for 2021. The 13-strong group expected an increase in demand by 5.9 million barrels per day compared to the previous year to an average of 95.9 million barrels.