OPEC cuts global oil demand forecasts, as Algeria says output curbs may deepen

OPEC has turned more bearish on global oil demand due to the second wave of COVID-19 infections, providing sobering analysis as a key minister said Nov. 11 that the producer group and its allies may consider deepening its production cuts in 2021 to shore up the market.

In its latest oil market forecast, OPEC's analysis arm revised down its projections of global demand by 280,000 b/d for 2020 and by 580,000 b/d for 2021. OPEC was more mixed in its outlook last month, when it slightly raised its 2020 demand estimate, citing economic growth in China.

"These downward revisions mainly take into account downward adjustments to the economic outlook in OECD economies due to COVID-19 containment measures, with the accompanying adverse impacts on transportation and industrial fuel demand through mid-2021," OPEC said in the report.

The new outlook puts pressure on members of the OPEC+ alliance, in their role as the oil market's swing producers, to reconsider plans to add output to the market starting in January.

The market appears to be largely expecting OPEC+, which meets Nov. 30-Dec. 1, to extend its current 7.7 million b/d in output cuts through at least the first few months of 2021, instead of tapering them to 5.8 million b/d as scheduled.

Algerian energy minister Abdelmajid Attar, who holds OPEC's rotating presidency, said the cuts could even be increased, confirming what several delegates have told S&P Global Platts in recent days.

Speaking at a Gas Exporting Countries Forum ministerial roundtable convened ahead of the body's formal meeting Nov. 12, Attar said OPEC and its partners remained committed to taking action to prevent a slide in prices, which have hovered around $40/b over the past few weeks before rallying close to $45/b on news that a potential COVID-19 vaccine was showing promising results.

"This includes the possibility of extending today's production adjustment into 2021 as well as deepening this adjustment should market conditions so require," he said.

OPEC CALL

OPEC pegged global demand for its crude for 2020 at 22.1 million b/d, about 300,000 b/d lower than last month's forecast. For 2021, the call on OPEC crude rises to 27.4 million b/d, a 600,000 b/d downward revision from the previous forecast.

OPEC pumped an average of 24.39 million b/d in October, according to secondary sources used by the organization to track output.

That indicates some room for the organization to raise its quotas, but surging production from Libya and the uncertain prospects for the global economy, even with a COVID-19 vaccine potentially available in the next few months, will likely keep ministers erring towards the side of caution, OPEC+ officials have said.

Libyan production almost tripled in October to 454,000 b/d, according to secondary sources. The country's state oil company reported that as of Nov. 7, output had reached more than 1 million b/d.

A key OPEC+ monitoring committee, co-chaired by Saudi Arabia and Russia, will convene online Nov. 17 and provide the first indications of how the coalition may decide on 2021 production policy.

The OPEC report estimated non-OPEC supply will average 62.73 million b/d for 2020 and 63.68 million b/d for 2021, the latter figure a 60,000 b/d upward revision from last month's outlook.

World oil inventories fell in September for the third consecutive month, according to the report, to hit 3.18 billion barrels, still 211.9 million barrels above the five-year average that the OPEC+ alliance has said it is targeting with its production cuts.