The Organisation of Petroleum Exporting Countries (OPEC) has projected a daily crude oil demand increase by 5.9 million barrels per day this year, against the 2020 market figures, following the discovery of COVID-19 vaccines and the ramping up of economic activities in China.
Secretary General of the oil cartel, Dr Sanusi Barkindo, who spoke Sunday during a Joint Technical Committee (JTC) of the organisation at its 47th meeting in advance of the 25th Meeting of the Joint Ministerial Monitoring Committee (JMMC), scheduled for Monday, described 2020 as a “horrific year”, but expressed optimism that the market was gradually picking up.
While thanking the committee’s members for their tireless efforts during one of the most volatile periods in the oil industry’s history, Barkindo reflected on the proactive and decisive decisions taken by the Declaration of Cooperation (DoC) countries and how those decisions saved the industry from collapse.
He said: ‘’Collectively, we have delivered an unprecedented response to an unparalleled market shock and continue to lead the industry on the road to recovery,” the OPEC boss stated.
He noted that the outcomes of the December 3 ministerial meeting paved the way for a gradual return of two mb/d to the market over the coming months, while the participating countries stand ready to adjust the levels depending on market conditions and developments.
Barkindo stated that the global economy is now forecast to grow by 4.4 per cent in 2021, noting that the recent developments of the COVID-19 vaccine have injected optimism into the economy and the oil market.
He added that the 13-member body anticipates that crude oil demand will shift from reverse to forward gear and underscored the necessity of continuing to work together under the framework of the landmark DoC for the benefit of producers, consumers and the world economy.
“China’s broad-based recovery forecast stands at about 6.9 per cent for 2021 and provides a beacon of hope for other economies, in the region and beyond.
“Our analysts in the secretariat anticipate that crude oil demand will shift from reverse to forward gear and rise to 95.9 million b/d this year, a gain of 5.9 million b/d from 2020. The non-OECD will be in the driver’s seat with growth of around 3.3 million b/d.
“These projections are a move in the right direction, but there is a wide valley separating this outlook from the secretariat’s pre-pandemic forecast. Before the current crisis, at around this time last year, we expected demand reaching 102 million b/d in 2021 – 6 million b/d more than the current projections.
“I am, however, encouraged by the positive momentum in the energy commodity markets, with crude oil prices up by around $7 per barrel or 17 per cent since our last meeting,” Barkindo said.
According to him, amid the hopeful signs, the outlook for the first half of 2021 remains mixed, indicating that there are still many downside risks to juggle as the world has only begun to emerge from a year of deep investment cuts, huge job losses and the worst crude oil demand disruption on record.
He recalled that it was only one year ago that the DoC participating countries began to introduce adjustments of a then-astonishing 1.7 million b/d, with additional voluntary contributions pushing that number to 2.1 million b/d.
“These adjustments, as agreed at the 7th OPEC and non-OPEC ministerial meeting in December 2019, were a pre-emptory response to support continued stability in 2020, actions that were welcomed widely as the market rang in a new and promising year. Looking back at the projections provided by the JTC, I don’t think anyone could have done a better job.
“In retrospect, those efforts taken at the end of 2019 pale in comparison to the scope and scale of the actions we have carried out since a series of ground-breaking ministerial meetings in April, June, and culminating in the visionary decisions taken at the last meeting one month ago today,” Barkindo said.
On a brighter note, he stated that following the last ministerial meetings, the price of Brent crude inched above $50 per barrel for the first time since early March, while US West Texas Intermediate experienced its longest stretch of advances since June.
“After the unprecedented shock experienced last year, the economic forecast calls for brighter days ahead. Our analysts expect the global economy to grow by 4.4 per cent in 2021 compared to a sharp contraction of around 4.2 per cent last year.
“The COVID-19 vaccinations provide upside potential for the economic outlook and may help usher in a strong rebound in the second half of 2021. Furthermore, we continue to see upward momentum in Asia, especially China,” he added.
Barkindo also said that the Christmas eve trade agreement between the United Kingdom and the European Union remains a promising development for the recovery process after months of difficult and rancorous negotiations.
He added: “Stimulus packages have clearly helped prevent deeper economic contractions and continue to lend crucial recovery support. The EU and US have now approved measures which, taken together, provide nearly $2 trillion in additional support for those economies.
“It is worth noting that fiscal and monetary stimulus packages in the G20, including bank guarantees, have reached $25 trillion, corresponding to more than 20 per cent of the global economy.
“Finally, inventory levels show positive momentum–though they remain stubbornly high. Preliminary November data shows total OECD commercial oil stocks fell by around 24.8 million barrels m-mo.
“The current levels are more than 205 million barrels higher than the same time one year ago and about 163 million barrels above the latest five-year average.”