The International Energy Agency (IEA) has adjusted the crude oil demand recovery outlook for this year by 300,000 barrels per day (bpd) to 5.5 million bpd in its latest Oil Market Report, yesterday.
The agency said it expected demand to average 96.6 million bpd in 2021, after crashing by an all-time high of 8.8 million bpd in 2020, under the weight of the COVID-19 pandemic.
On the supply side, the IEA projected a recovery of over one million barrels per day, most of it to come from OPEC members after last year’s supply fell by 6.6 million bpd.
It also sounded a positive note, leaving space for further improvement in supply during the second half of the year, with the rate of improvement reaching 1.2 million bpd.
The report noted, however, that “OPEC+ has taken a more flexible approach to market management and will meet monthly to decide on output levels.”
The IEA attributed its expectations for demand and supply growth to the rollout of COVID-19 vaccines across much of the world, however, noted demand rebound would be slow because of the renewed or extended lockdowns in some countries, which are weighing on fuel demand.
Yesterday, the Brent Crude traded at $56.29, while Nigeria’s Bonny Light rose by 0.11 per cent to $55.31 as at 6:45 pm local time.
With rising prices, Nigeria hopes to bridge the gap in its fiscal spending, having pegged its budget benchmark at $40 a barrel. On the flip side, rising oil prices spell concerns for consumers who may have to pay more for imported fuel.
Earlier this month, the IEA’s Head of Division for Energy Supply Outlooks and Investment, Tim Gould, warned that the oil industry was facing major challenges from the continuing pandemic, which created massive uncertainty.
It credited OPEC+ with speeding up a drawdown in global oil stockpiles, noting that if the cartel achieved a compliance rate of 100 per cent with its self-imposed production caps, the drawdown could reach 100 million barrels over the first quarter of the year alone.
The recovery picture in the crude oil market would likely continue to stay mixed, with bullish data pointing to both rising domestic demand for refined products as well as the potential for more supply to be offered to the wider global oil market.
Data from China’s National Bureau of Statistics showed that 7.3 per cent more crude oil was imported in 2020 than in 2019, signalling a robust demand recovery in the country.
“There are bearish and bullish arguments. Almost every news can be interpreted in several different ways,” said Eugen Weinberg, an analyst at Commerzbank.