Demand will rise by 5.79 million barrels per day (bpd) this year to 96.05 million bpd, the Organization of the Petroleum Exporting Countries said in a monthly report, trimming its growth forecast by 110,000 bpd from a month ago.
The prospect of weaker demand has already prompted OPEC and its allies, known as OPEC+, to slow their plan to boost output. More demand, rising prices and lower rival supply could support the case for more easing, but Iraq said on Wednesday OPEC+ was likely to keep current cuts in March.
“While the global economy is showing signs of a healthy recovery in 2021, oil demand is currently lagging, but is forecast to pick up in the second half of 2021,” OPEC said in the report.
OPEC has steadily lowered its 2021 oil demand growth forecast from 7 million bpd expected in July. Still, the latest forecast is stronger than the prediction made in an internal OPEC report seen this month by Reuters.
The group raised its forecast of world economic growth this year to 4.8% from 4.4% previously, despite the impact of “challenges” such as COVID-19 variants and the effectiveness of vaccines.
“The global vaccination rollout is gaining pace, infection rates are falling in some areas, improvements in treatment and the growing use of rapid testing facilities all lend support to an acceleration of economic activity after the first quarter,” OPEC said.
While demand is lagging, the report showed supply from rivals is underperforming too.
OPEC trimmed its non-OPEC supply growth forecast to 670,000 bpd this year from 850,000 bpd previously, and said output of U.S tight crude, another term for shale, would decline despite higher oil prices.
“Supply from the U.S. is challenged by short-term uncertainties around COVID-19 (and) continued capital expenditure discipline leading to lower upstream capital spending by U.S. oil companies,” OPEC said.
Last month, OPEC raised its forecast for U.S. shale output this year, in a sign higher oil prices were helping a key competitor.
OPEC+ producers cut supply by a record 9.7 million bpd last year to support the market.
They agreed to pump an extra 500,000 bpd in January under a plan to unwind the curbs gradually. Most producers are returning to supply restraint this month and in March.
OPEC crude production in January rose by 180,000 bpd to 25.50 million bpd, the report said, led by Saudi Arabia, Iran and Venezuela. This is less than the 300,000 increase allowed under the OPEC+ plan for January.
Partly due to the lower non-OPEC supply forecast, OPEC raised its estimate of demand for its crude to 27.5 million bpd this year, up 300,000 bpd from last month. That would still allow for higher average OPEC production in 2021.