In a monthly report, the Organization of the Petroleum Exporting Countries said demand will rise by 5.89 million barrels per day (bpd) in 2021, or 6.5%, up slightly from last month. But the group cut its forecasts for the first half.
“Total oil demand is foreseen to reach 96.3 million bpd with most consumption appearing in the second half,” OPEC said in the report.
“This year’s demand growth will not be able to compensate for the major shortfall from 2020 as mobility is forecast to remain impaired throughout 2021.”
The latest forecasts could bolster cautious views among OPEC and its allies, known as OPEC+, on how quickly to unwind more of last year’s record oil output cuts. OPEC+ last week decided to mostly extend current curbs into April.
Oil held onto most of an earlier gain after the report was released, trading close to $69 a barrel. Prices have risen to pre-pandemic highs this month, boosted by hopes of economic recovery and OPEC+ supply restraint.
OPEC raised its forecast of world economic growth this year to 5.1% from 4.8% as activity accelerates by the end of the first half. Still, it sees the mobility restrictions continuing to dampen oil demand, despite faster growth.
“Oil-intensive sectors, especially travel and transportation, will remain disproportionately affected, with a larger negative impact on 2020 oil demand and a lower positive contribution to 2021 oil demand, relative to global economic growth,” OPEC said.
SAUDI DELIVERS CUT
The report also showed lower OPEC oil output in February as most OPEC+ members returned to output restraint and Saudi Arabia pledged a voluntary cut of 1 million bpd for February and March.
OPEC said its February output fell by 650,000 bpd to 24.85 million bpd, driven by the Saudi move. Riyadh told OPEC it made almost all of the reduction, lowering production by 956,000 bpd to 8.147 million bpd.
Saudi Arabia as part of last week’s OPEC+ decision extended the voluntary cut into April.
OPEC+ cut supply by a record 9.7 million bpd last year to support the market as demand collapsed. The producers as of February were still withholding about 8.1 million bpd.
While those curbs persist, rivals are boosting supply and OPEC raised its forecast of non-OPEC output growth to almost 1 million bpd led by Canada, the United States, Norway and Brazil – although U.S. shale output is still expected to drop.
Partly due to the higher non-OPEC supply forecast, OPEC trimmed its estimate of global demand for its crude to 27.3 million bpd this year. This would still allow for higher average OPEC production in 2021.