The International Energy Agency (IEA) has cut its 2021 forecast for oil demand by 0.3 million barrels. It will take more time for oil demand to recover fully as renewed lockdown measures will further limit mobility, the IEA said.
According to the energy agency, world oil demand is now expected to rise by 5.5 million barrels per day (bpd) to 96.6 million this year, following an unprecedented collapse of 8.8 million bpd in 2020.
“This recovery mainly reflects the impact of fiscal and monetary support packages as well as the effectiveness of steps to resolve the pandemic,” the agency said in a report published on Tuesday.
The IEA said that oil demand growth was projected to fall slightly during the first three months of this year but tougher government plans on additional travel restrictions could curb worldwide mobility once again. That has prompted the agency to trim its first-quarter forecast for oil demand growth to 94.1 million barrels per day. The downward revision would see oil demand return to near last year’s levels.
“The global vaccine rollout is putting fundamentals on a stronger trajectory for the year, with both supply and demand shifting back into growth mode following 2020’s unprecedented collapse,” said the report. “But it will take more time for oil demand to recover fully as renewed lockdowns in a number of countries weigh on fuel sales.”
The energy watchdog also said that higher demand will allow supply to start rising this year. “World oil supply is now expected to increase by 1.2 million bpd in 2021 following a record decline of 6.6 million bpd last year. Much more oil is likely to be required, given our forecast for a substantial improvement in demand in the second half of the year.”
The IEA has assumed that during the second half of 2021, the Organization of the Petroleum Exporting Countries and allied producers, known as OPEC+, will still withhold 5.8 million bpd of oil from the market as per the group’s April 2020 agreement.
“However, OPEC+ has taken a more flexible approach to market management and will meet monthly to decide on output levels,” it said.
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