Opec on Tuesday raised its growth forecast for world oil demand this year on expectations that the pandemic will subside just as the group and its allies plan to unleash more crude supplies over the next few months.
In its closely watched monthly oil market report released on April 13, Opec raised its demand forecast by 190,000 b/d from its March estimate, expecting consumption to average 96.46 million b/d this year, citing economic stimulus programs and a further easing of Covid-19 lockdown measures.
Year on year, global oil demand was projected to grow 5.95 million b/d or 6.6 per cent in 2021, compared with the 5.89 million b/d forecast in March, or up 70,000 bpd.
Only two weeks ago, Opec cut its 2021 oil demand growth forecast by about 5.0 per cent to 5.6 million b/d after pressure by some members of an Opec+ technical committee who favored maintaining tight production quotas.
“As the spread and intensity of the pandemic are expected to subside with the ongoing rollout of vaccination programmes, social distancing requirements and travel limitations are likely to be scaled back, offering increased mobility,” Opec said in the report.
"The upward revision mainly takes into account a stronger economic rebound than assumed last month, impacting primarily OECD oil demand in the second half of 2021, supported by stimulus programmes and a further relaxation in Covid-19 measures, amid an accelerated vaccination roll out," the report said. It sees the bulk of consumption growth taking place in the second and third quarters this year, when respective global demand will rise by 12.0mn b/d and 6.5mn b/d.
Oil gained further towards $64 a barrel after the report was released on Tuesday. Prices have risen to pre-pandemic highs above $70 this year, boosted by anticipation of economic recovery and Opec+ supply restraint.
“Prices may be gaining today, but there is still a plethora of short-term hesitancy over Covid-19 breakouts and vaccine progress. Lockdowns in India and extended lockdowns in Europe threaten to offset the gains made by the US, UK, and other countries slowly lifting restrictions,” analysts at Rystad Energy said.
Opec and partners ended up abruptly agreeing April 1 to loosen their quotas and add more than two million b/d into the market by July, banking on a more robust recovery for the global economy.
The Opec+ alliance will raise its collective output caps by 350,000 b/d in May, another 350,000 b/d in June, and 441,000 b/d in July.
At the same time, Saudi Arabia, which has been cutting an extra one million b/d on top of its quota to help bolster the market, will unwind it by 250,000 b/d in May, 350,000 b/d in June and 400,000 b/d in July.
Opec made a small upward revision in its 2021 demand projection last month, but it has steadily lowered the forecast from 7.0 million bpd expected in July 2020.
The group raised its forecast of 2021 world economic growth to 5.4 per cent from 5.1 per cent, assuming the impact of the pandemic is “largely contained” by the beginning of the second half of the year.
“The global economic recovery continues, significantly supported by unprecedented monetary and fiscal stimulus,” it said. “The recovery is very much leaning towards the second half of 2021.”