Oil Settles Lower as OPEC Cuts Demand Forecast
By Adedapo Adesanya
Oil prices turned bearish after the Organisation of the Petroleum Exporting Countries (OPEC) cut its 2021 oil demand forecast due to high prices.
Brent crude futures shed 34 cents or 0.40 per cent on Thursday to trade at $82.53 a barrel, while the US West Texas Intermediate crude declined by 31 cents or 0.38 per cent to $81.28 per barrel.
In its closely watched Monthly Oil Market Report (MOMR) on Thursday, the cartel revised down its forecast by 160,000 barrels per day after cutting expectations of fourth-quarter consumption by 330,000 barrels per day compared to last month’s outlook.
OPEC sees oil demand growth in 2021 at 5.65 million barrels per day over 2020, compared to 5.82 million barrels per day expected in the October report with global oil demand expected to average 96.4 million barrels per day this year.
This was the second consecutive downward revision in the 2021 oil demand growth outlook, after the cartel cut in October its estimates of this year’s global oil demand growth to 5.8 million barrels per day, down from the September estimate of 5.96-million barrels per day annual growth.
The downward revision in today’s report was mainly due to slower than anticipated demand from China and India in the third quarter.
“In addition, a slowdown in the pace of recovery in 4Q21 is now assumed due to elevated energy prices,” OPEC said in its report on Thursday.
The cartel cut its estimate for oil demand for this quarter by 330,000 barrels per day and now sees global demand at 99.49 million barrels per day, down from 99.82 million barrels per day projected last month.
The organisation, however, left its 2022 estimates unchanged from October, still expecting global oil demand to grow by 4.2 million barrels per day next year compared to 2021. Next year, average global oil demand will exceed pre-COVID levels, the cartel says.
Total oil demand in 2022 is now estimated to reach 100.6 million barrels per day, which would be around 500,000 barrels per day above 2019 levels.
Also dampening the market, the dollar rose to almost 16-month highs against the Euro and other currencies due to bets on interest rate hikes from the US Federal Reserve.
Data on Wednesday showed a broad-based rise in US consumer prices last month at the fastest annual pace since 1990, fueling speculation that policymakers would lift interest rates sooner than expected, a move that could affect the movement of oil prices.