By Adedapo Adesanya
Nigeria, alongside other oil-dependent economies, will still contend with poor oil demand in 2021 as the latest forecast showed that demand will rebound more slowly than previously thought.
This is according to the Organisation of the Petroleum Exporting Countries (OPEC) in its monthly report for January released yesterday, adding to a series of downgrades as the impact of the pandemic.
According to the cartel, demand will rise by 5.79 million barrels per day this year to 96.05 million barrels per day.
“While the global economy is showing signs of a healthy recovery in 2021, oil demand is currently lagging, but is forecast to pick up in the second half of 2021,” OPEC said in the report.
OPEC has steadily lowered its 2021 oil demand growth forecast from 7 million barrels per day expected in July.
The only succour for Nigeria and other OPEC members is that while their demand is lagging, supply from their rival, shale oil, is underperforming too.
OPEC trimmed its non-OPEC supply growth forecast to 670,000 barrels per day this year from the previous 850,000 barrels per day and said output of US tight crude, another term for shale, would decline despite higher oil prices.
“Supply from the US is challenged by short-term uncertainties around COVID-19 (and) continued capital expenditure discipline leading to lower upstream capital spending by US oil companies,” OPEC said in the report.
The prospect of weaker demand has already prompted OPEC and its allies, known as OPEC+, to slow their plan to boost output. More demand, rising prices and lower rival supply could support the case for more easing.
OPEC+ producers cut supply by a record 9.7 million barrels per day last year to support the market and had tapered it to around 7.2 million barrels a day.
Recently, they agreed to pump an extra 500,000 barrels per day in January under a plan to unwind the curbs gradually. Most producers are returning to supply restraint this month and in March.
OPEC also noted crude production in January rose by 180,000 bpd to 25.50 million barrels per day, the report said, led by Saudi Arabia, Iran and Venezuela. This is less than the 300,000 increase allowed under the OPEC+ plan for January.
Partly due to the lower non-OPEC supply forecast, OPEC raised its estimate of demand for its crude to 27.5 million bpd this year, up 300,000 bpd from last month. That would still allow for higher average OPEC production in 2021.
The group raised its forecast of world economic growth this year to 4.8 per cent from 4.4 per cent previously, despite the impact of challenges such as COVID-19 variants and the effectiveness of vaccines.
“The global vaccination rollout is gaining pace, infection rates are falling in some areas, improvements in treatment and the growing use of rapid testing facilities all lend support to an acceleration of economic activity after the first quarter,” OPEC said.
