By Adedapo Adesanya
Oil prices held their positive run despite the Organisation of the Petroleum Exporting Countries (OPEC) revising its expectations for global oil demand downwards due to the renewed spike in coronavirus cases in major economies.
On Wednesday, the Brent crude moved up by 0.3 per cent or 13 cents to sell at $43.74 per barrel while the United States’ futures, West Texas Intermediate (WTI) crude, made a 0.17 per cent or 7 cents gain to trade at $41.41 per barrel.
In its Monthly Oil Market Report (MOMR), the cartel on Wednesday cut its global oil demand forecast for this year by 300,000 barrels per day compared to last month’s estimate. The group now sees global oil demand at slightly above 90.0 million barrels per day this year, down by 9.8 million barrels per day compared to 2019.
The main reasons for the expected lower demand for this year are the recent new lockdowns and curfews in many major European economies, including the United Kingdom, France, Germany, and Italy, as well as weaker-than-expected demand in the developed economies in the Americas in the third quarter of 2020.
The weaker oil demand recovery is expected to continue into 2021, according to OPEC, which also cut its estimate for global oil demand for necxt year. In 2021, oil demand is expected to grow by 6.2 million barrels per day compared to 2020.
This is a downward revision of 300,000 barrels per day compared to OPEC’s October forecast. Next year, total global demand is expected to reach 96.3 million barrels per day which is still lower than the demand before the pandemic.
OPEC’s assessment that the second COVID-19 wave is hitting oil demand more than previously thought comes weeks before the cartel and its Russia-led partners meet on November 30 and December 1 to discuss the state of the oil market and how to proceed with the ongoing record production cuts.
OPEC’s new downward revision of its oil demand forecasts is giving the market all the more reasons to speculate that the OPEC+ group needs to roll over the 7.7 million barrels per day cut into 2021, instead of easing it by 2 million barrels a day from January.
But with the market still hopeful that vaccines may roll out soon following announcement from Pfizer and BioNTech, it is hoped a safe and effective vaccine could help bring an end to the coronavirus pandemic that has claimed over 1.27 million lives.
