OPEC revises up 2021 oil demand forecast with more growth seen in H2

Dubai — OPEC raised its estimate of 2021 global oil demand from last month, saying growth especially for industrial fuels in the second half will be led by positive economic developments supported by "massive stimulus programs."

Demand will average 96.1 million b/d this year, up from 95.91 million b/d forecast last month, OPEC said Feb. 11 in its closely watched monthly market report. The estimated increase of 5.8 million b/d over 2020 was revised down by about 100,000 b/d as H1 projections were lowered due to extended and partially re-introduced lockdowns because of the pandemic. Demand fell 9.7 million b/d in 2020.

OECD commercial oil inventories in December declined to 3.068 billion barrels, or 143.4 million barrels above the five-year average, the lowest since June 2020.

The OPEC+ group that includes Russia wants to reduce stockpiles to the five-year average through its production cuts, which are entering their fifth year. Quotas are now set through the end of March. The OPEC+ alliance will meet again March 4 to determine April quotas.

"While the global economy is showing signs of a healthy recovery in 2021, oil demand is currently lagging, but is forecast to pick up in 2H 2021," OPEC said in the report. "With this, a healthy rebound in oil demand, in combination with the vigilant stance and considerable efforts of the countries participating in the Declaration of Cooperation, are essential to maintaining stability in the oil market."

The Declaration of Cooperation was formalized in December 2016 and took effect in January 2017.

The pain for transportation fuels from the pandemic is expected to carry over, especially into the first quarter of 2021, with a stronger rebound in oil demand growth, especially for industrial fuels, in 2H 2021, OPEC said.

The analysis showed that the call on OPEC -- or how much of the bloc's crude production will be needed to balance global supply and demand -- would remain considerably higher than what it pumped in January.

The call is pegged at 27.5 million b/d for 2021, compared with OPEC's January production of 25.5 million b/d, as assessed by independent secondary sources used by the secretariat to track member output. The forecast call on OPEC was increased from 27.17 million b/d in January, while the estimate for non-OPEC supply growth was lowered to 670,000 b/d from 850,000 b/d last month.

Keeping production below the call will help OPEC and its allies induce draws from storage.

The report guides the group's discussions and forms the basis of the market scenarios prepared by the OPEC secretariat's analysis arm for the policy negotiations.