On Tuesday, OPEC lifted its outlook for global oil demand growth this year, citing the possibility that the pandemic would abate, assisting the group and its allies in their attempts to support the market.
According to the Organization of Petroleum Exporting Countries’ monthly report, demand will grow by 5.95 million barrels per day (bpd) in 2021, or 6.6 percent. This is up 70,000 bpd from the previous month.
“As the spread and severity of the COVID-19 pandemic is predicted to subside with the continued introduction of vaccine programs, social distancing and travel restrictions are likely to be scaled down, allowing for greater mobility,” according to OPEC.
The upward adjustment contrasts with OPEC’s previous months, when market projections were lowered due to continuing lockdowns. A stronger recovery could help OPEC and its partners, dubbed OPEC+, unwind some of last year’s historic oil production cuts.
Following the publication of the survey on Tuesday, oil prices climbed even higher, approaching $64 a barrel. This year, prices have risen to pre-pandemic levels above $70, fuelled by expectations of economic growth and supply restraint from OPEC+.
Last month, OPEC made a minor upward adjustment to its 2021 demand outlook, but it has gradually lowered it from the 7 million bpd forecast in July 2020.
The group increased its 2021 global economic growth outlook to 5.4 percent from 5.1 percent, ensuring the pandemic’s effect is “largely limited” by the start of the second half of the year.
“The global economic recovery is continuing, aided by unparalleled monetary and fiscal stimulus,” according to OPEC. “The rebound is expected to start in the second half of 2021.”
On April 1, OPEC+ decided to steadily reduce oil production cuts starting in May. The report also revealed that OPEC oil output has already increased, as Iran, which is excluded from voluntary cuts due to US sanctions, pumped more in March, bringing the group’s output to 25.04 million bpd.
Last year, OPEC+ reduced production by a historic 9.7 million barrels per day (bpd) to boost the market as demand fell. Even after the April 1 ruling, the majority of those restrictions stay in effect. On April 28, OPEC+ will host its next policy conference. Rival producers are still increasing demand, despite OPEC maintaining its outlook for non-OPEC production growth in 2021 at nearly 1 million bpd and continuing to see US shale output decline, which also recovers in reaction to higher prices.
OPEC increased its forecast of global demand for its oil to 27.4 million bpd this year, up 200,000 bpd from last month and allowing for higher average OPEC output in 2021, thanks to higher demand and stable non-OPEC supply.
