OPEC has again lowered its forecast for world oil demand in 2020, reflecting concerns over the market’s recovery amid a resurgence in COVID-19 infections.
In its latest monthly oil report, OPEC said Wednesday that demand will tumble by 9.8 million barrels per day this year, up 300,000 bpd from last month’s forecast.
For next year, the group now sees demand growing by 6.2 million bpd on an annual basis, representing a downward revision of another 300,000 bpd from October report. The 2021 forecast has declined steadily from an initial expectation of 7 million bpd in July.
“As new COVID-19 infection cases continued to rise during October in the U.S. and Europe, forcing governments to re-introduce a number of restrictive measures, various fuels including transportation fuel are thought to bear the brunt going forward,” the report said. “Previous expectations for the demand recovery [have] diminished and a further deterioration in demand is now anticipated.”
OPEC noted that governments in Europe, such as France, Germany and the U.K., have introduced curfews, partially or fully shut down hospitality services, including restaurants, and are encouraging teleworking.
“The oil demand recovery will be severely hampered and sluggishness in transportation and industrial fuel demand is now assumed to last until mid-2021,” it said.
As CNBC reports, the coronavirus-fueled demand shock “has seen oil prices collapse in 2020, with strict public health measures coinciding with curtailed travel and economic activity. An easing of lockdown measures in the third quarter helped global oil demand to improve, but OPEC now fears a surge in the number of reported Covid-19 cases could derail an expected recovery.”
Oil contracts, though, were on pace Wednesday to record their third consecutive positive trading session, with Brent crude up about 2.8%, as hopes of an effective coronavirus vaccine continued to bolster market sentiment. Pfizer and BioNTech said Monday that early results showed their vaccine candidate was more than 90% effective in preventing COVID infections.
“Ongoing developments in the COVID-19 pandemic will continue to dominate a recovery amid the latest news relating to a potential imminent vaccine,” OPEC said.