By Adedapo Adesanya
Nigeria and other oil-dependent economies are facing a worsening situation as it appears that oil demand won’t see any improvement anytime soon.
This is based on a new report from the Organisation of the Petroleum Exporting Countries (OPEC), which downwardly revised global oil demand to an average of 90.2 million barrels per day in 2020.
The oil cartel in a report released on Monday said this was caused by a weaker-than-expected recovery in India and other Asian countries, and warned that risks remain “elevated and skewed to the downside” for the first half of next year.
The new downsizing indicates a 400,000 barrels per day difference from the previous month’s estimate and reflects a contraction of 9.5 million barrels daily year-on-year.
The outlook came as the market becomes increasingly concerned about a faltering economic recovery and stumbling fuel demand caused by the coronavirus pandemic.
The group revised oil demand in Organisation for Economic Cooperation and Development (OECD) countries up by around 100,000 barrels per day due to less-than-expected declines in all sub-regions during the second quarter.
However, oil demand was revised down by 500,000 barrels per day in the non-OECD region due to weaker oil demand performance in Asia, particularly in India.
Looking ahead, OPEC said the negative impact on oil demand in Asia was expected to persist through the first six months of 2021. It sees consumption rising by 6.62 million barrels a day, which is 370,000 barrels per day less than expected last month.
This is coming when oil prices have shelved more than 40 per cent since the beginning of the year when prices hit $70 per barrel.
OPEC and its allies are expected to hold an online monitoring meeting on Thursday to assess whether the huge output cuts being implemented are still serving the purpose with which they were implemented or if there will be a need to start making new considerations.
In Nigeria’s case, additional cuts won’t help the situation on the ground as crude, which accounts for 90 per cent of foreign exchange earnings, will be furthered impacted as the country’s debt has piled higher due to borrowings to augment revenue for this year’s budget spending.
