Opec has revised down its global oil demand growth forecast by around 300,000 b/d for 2020 and 2021, as the impact of a Covid-19 resurgence spills into the fourth quarter as well as next year.
Demand is now forecast to fall by 9.75mn b/d in 2020 to just over 90mn b/d, Opec said in its latest Monthly Oil Market Report (MOMR). Last month’s report predicted 2020 consumption to drop by 9.47mn b/d on the year. The revision follows renewed lockdowns in a number European countries and weaker-than-expected third-quarter demand in OECD Americas which offset a rebounding economic activity in China.
Opec said the additional containment measures will cause adverse impacts on transportation and industry fuel demand into mid-2021, leading to a downward revision to its 2021 oil demand forecast to 96.26mn b/d. Last month’s report pegged next year’s demand at 96.84mn b/d.
Renewed pressure on oil demand has raised doubts about the oil market’s ability to absorb additional supply as the Opec+ coalition looks to raise combined crude output by around 2mn b/d from January. The alliance is open to tweaking its deal if necessary, Saudi energy minister Prince Abdulaziz bin Salman said this week ahead of the Opec and Opec+ meetings on 30 November and 1 December.
But Opec said “risks” and “large uncertainties” remain with regards to oil markets. The “strength of the rebound in economic activities” depends largely on the progress on a Covid-19 vaccine, developments in labour markets, new policies governing the energy sector, and large-scale monetary and fiscal stimulus measures, the report said.
On the supply side, the pace of growth for non-Opec liquids has been revised lower this year but increased for 2021. Non-Opec production is now expected to average 62.73mn b/d in 2020, down by 2.43mn b/d and 60,000 b/d lower than last month’s projections. This follows production outages in the Gulf of Mexico from two hurricanes last month, and lower-than-expected output in Norway, the UK and Mexico.
Non-Opec output is forecast to rise by 950,000 b/d next year, up by 60,000 b/d from last month’s forecast on higher expectations for production in Oman and China.
Opec has reduced the projected call on its own members’ crude for 2020 to 22.14mn b/d, down by over 200,000 b/d from the previous month and 7.2mn b/d lower than in 2019. Demand for Opec crude next year is now at 27.36mn b/d, down by 600,000 b/d from the previous month and up by 5.22mn b/d on the year.
Opec crude production averaged 24.39mn b/d in October, up from 24.06mn b/d in the previous month, according to an average of secondary sources including Argus. This made Opec participants 104pc compliant with the Opec+ agreement, similar to the estimate by Argus.
Citing preliminary data, Opec said OECD commercial stocks stood at 3.18bn bl in September, down by 15.3mn bl on the month and 211.9mn bl above the latest five-year average.