Oil Demand Recovery to Fall Short

Proshare

Friday, January 15, 2021 / 2:37 PM / by FDC Ltd / Header Image Credit: Bloomberg


Proshare Nigeria Pvt. Ltd.


Oil prices may have surged to $56pb (highest levels in 11 months) following OPEC+'s decision to increase oil output by 75,000bpd in February over January levels and the surprise cuts by the Saudi's (1mbpd in February and March above its current quota). However, global appetite for crude will remain subdued in Q1'21 due to rising COVID-19 infection rates and lockdown measures.

 

In its January monthly oil market report, OPEC maintained its forecast that world oil demand in 2021 won't recover to Pre-pandemic levels. This is after it lowered projections for global oil demand in the first quarter of 2021 by 1mbpd as "Uncertainties remain high, mainly surrounding the development of the Covid-19 pandemic and rollout of vaccines, as well as the structural impact of Covid-19 on consumer behaviors, predominantly in transportation sector".

 

In spite of the emergence and deployment of vaccines, rising infection rates in many advanced economies is holding back the economic recovery, triggering revisions to economic growth forecasts for Q1'21. OPEC expects global oil demand in 2021 to rise to 95.9mbpd after taking a 10% hit in 2020. One of the key drivers of global oil demand is Asian (China and India) demand. OPEC expects demand in these non-OECD countries to rise by 3.3mbpd in 2021.

 

With crude prices now steady above the $50pb mark, which is the break-even price for many shale producers, OPEC will be wary of the growing incentive of their competitors to increase output and this could lead to not just a loss in market share but to another glut in the market.

 

A weaker US dollar is also boosting the appeal of dollar-denominated commodities. The emergence and rollout of COVID-19 vaccines is fueling investor confidence in the commodities market, with oil in particular, emerging as a favoured trade to hedge against inflation.


Proshare Nigeria Pvt. Ltd.


Related News

  1. Petrol: Back to Subsidies
  2. Nigerian Oil Major Focuses on Condensates to Offset OPEC Cuts
  3. Oil and Gas: Understanding Oil and Gas Companies By Numbers
  4. Oil and Gas: Linking Up the Dots
  5. Crude Price Boosted By Voluntary Cut
  6. Oil Prices Jump on Weak Dollar - OIR 120121
  7. Oil and Gas: Taking a Peek at the Pump Well
  8. Oil and Gas: Working the New Normal in the Time of a Pandemic
  9. The Oil Bulls Are Back - OIR 080121
  10. COVID-19: New Variant, Revised Oil Production Cuts


Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

READ MORE:
Related News
SCROLL TO TOP