Global oil demand will rebound more slowly in 2021 than previously thought because of rising coronavirus cases, OPEC said on Wednesday, hampering efforts by the group and its allies to support the market. Demand will rise by 6.25 million barrels per day (bpd) next year to 96.26 million bpd, the Organization of the Petroleum Exporting Countries said in a monthly report. The growth forecast is 300,000 bpd less than expected a month ago.
The weakening demand recovery could support the case for OPEC and its allies, a group known as OPEC+, to delay a scheduled increase in oil output next year. The latest report was published ahead an OPEC+ advisory panel meeting next week before the group convenes to set policy over Nov. 30 and Dec. 1.
OPEC said that recent moves by European governments to shut restaurants and encourage working from home would hit demand for the rest of 2020, with pandemic's impact on the oil market lingering until the middle of next year. "The oil demand recovery will be severely hampered and sluggishness in transportation and industrial fuel demand is now assumed to last until mid-2021," OPEC said in the report.
Oil prices have risen this week and hit a more than two-month high above $45 a barrel on Wednesday after drugmakers Pfizer and BioNTech said their COVID-19 treatment was more than 90% effective in initial trial results. OPEC said that "an effective and widely distributable vaccine" could support the economy as soon as the first half of 2021.
To tackle this year's collapse in demand, OPEC+ began a record supply cut of 9.7 million bpd from May 1, representing about 10% of global oil consumption. The cut was tapered to 7.7 million bpd in August and OPEC+ plans further tapering next year by boosting supply by 2 million bpd from January.
With COVID-19 cases rising and prices under pressure, Algeria has said it supports keeping the current cuts in place while Saudi Arabia this week said that the deal could be tweaked, perhaps beyond what analysts expect.
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