IEA Cuts Global Oil Demand amid Resurgence of Covid Cases and New Lockdown Restrictions

The International Energy Agency (IEA) cut its 2021 global oil demand forecast to recover by 5.5 million barrels per day (bpd), a revision of 0.3 million barrels from its forecast last month, citing soaring Covid-19 cases and renewed lockdown measures in many countries that limited mobility.

 

IEA expected global oil demand in 2021 at 96.6 million bpd, down from earlier projections of 97.4 million due to the resurgence in Covid-19 cases that slowed the rebound. However, IEA expected that a widespread vaccination effort and an acceleration in economic activity is expected to spur stronger growth in the second half of the year.

 

Higher demand will allow supply to start rising this year. World oil supply is now expected to increase by 1.2 million bpd in 2021 following a record decline of 6.6 bpd last year. Much more oil is likely to be required, given IEA’s forecast for a substantial improvement in demand in the second half of the year.

IEA’s balances assume that during 2H21, OPEC+ will still withhold 5.8 bpd of oil from the market as per the group’s April 2020 agreement. However, OPEC+ has taken a more flexible approach to market management and will meet monthly to decide on output levels.

 

In addition, global oil markets, battered by Covid-19, opened the New Year with a price rally gathering pace. Brent rose to $57/bbl and WTI to $53/bbl, reflecting a boost in demand on a cold-snap in Europe and Asia and OPEC+ supply cuts that look set to keep markets in deficit.