The Organization of the Petroleum Exporting Countries (OPEC) released its last monthly market report of the year on Monday, once again lowering its forecast for oil demand growth in 2021, citing the uncertainty caused by the new coronavirus epidemic currently raging around the world, which may have a negative impact on developed economies. It reflects the impact on fuel demand in the first half of next year, but is optimistic about future economic recovery prospects.
The world economy will rebound
OPEC believes that the impact of the epidemic on the world The economic impact is far-reaching. Economic activity in various countries rebounded significantly in the third quarter of this year. The main supporting factors for the rebound were strong fiscal and monetary stimulus, as well as the gradual easing of restrictive measures by the government. In addition, household savings in various economies have laid a solid foundation for resuming consumption and boosting global trade and investment.
International oil prices continued to rebound in November, and good news about COVID-19 vaccines boosted optimism about the recovery of oil demand. The premium structure among crude oil futures contracts has gradually narrowed, and institutions are more optimistic about the outlook for oil prices, believing that the fundamentals of global oil demand are expected to continue to improve in the coming months.
OPEC is optimistic about the recovery prospects of emerging economies
OPEC expects the global economy to shrink by 4.2% this year, an increase of 0.1 percentage points from last month’s forecast. Recent positive news on faster-than-expected vaccination programs in major economies provides potential tailwinds for next year’s growth forecasts. The global economy is expected to grow by 4.4% in 2021, and emerging economies will grow faster than developed economies. The GDP growth rates of the United States, the Eurozone and Japan are expected to be 3.4%, 3.7% and 2.8% respectively.
There is uncertainty in the supply and demand situation
OPEC’s latest estimate is that world oil demand will fall by 9.77 million barrels per day in 2020 , to 89.99 million barrels per day, slightly lower than last month’s assessment. Mainly due to the recent decline in transportation fuel demand in the United States and Europe due to the rebound of the epidemic, the recovery of demand in China and India has largely filled the gap.
OPEC said that economic recovery coupled with the low base effect in 2020 will support oil demand growth next year, and is optimistic about the market rebound driven by the gradual recovery of the transportation and industrial sectors. However, there is still great uncertainty, which mainly depends on the development of the epidemic and the effectiveness of vaccines, as well as the structural impact of the virus’s shadow on consumer behavior. OPEC has reduced world oil demand growth in 2021 by 350,000 barrels per day to 5.9 million barrels per day, including a reduction of 1 million barrels per day in the global fuel consumption forecast for the first quarter.
OPEC lowers demand growth forecast for next year
On the supply side, in response to unprecedented market changes, OPEC and non-OPEC members participating in the production reduction agreement have reduced excess production capacity by approximately 9.5 million barrels per day this year. In addition, the United States and Canada have shut down drilling Production capacity was further reduced by 3.6 million barrels per day.
In addition to the production reduction agreement, OPEC believes that supply from non-OPEC oil-producing countries will rebound modestly by 850,000 barrels per day in 2021 due to a gradual increase in drilling activity in North America, Norway and Brazil Production activities will also increase, but the overall recovery of the industry depends on the final effect of epidemic prevention and control and the speed of economic recovery.
Crude oil inventories remain at high levels. The total OECD commercial oil inventory in October was 3.145 billion barrels, an increase of 225.2 million barrels year-on-year, and 203.0 million barrels higher than the average level of the last five years. bucket.
Reaffirming commitment to production cuts
OPEC stated that OPEC+ member states have taken quick and decisive action this year within the framework of the “Declaration of Cooperation” Adjusting oil production effectively avoided serious imbalances in the oil market. At the OPEC and non-OPEC ministerial meeting held on the 3rd of this month, all parties reaffirmed their commitment to reduce production, which is crucial to achieving long-term oil market stability.
OPEC reiterated that starting from January 2021, participating countries in the production reduction agreement decided to voluntarily adjust their production reduction quotas from 7.7 million barrels per day to 7.2 million barrels per day. In addition, all parties agreed to hold ministerial meetings of oil-producing countries every month starting from January to assess market conditions and confirm production plans for the next month.
OPEC decided to postpone this week’s meeting of the OPEC+ Joint Technical Committee and Ministerial Monitoring Committee to January 3 and 4. </p
