OPEC has increased its oil demand outlook for 2021 just as the bloc and its allies plan to unleash more crude supplies over the next few months.
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In its closely watched monthly oil market report released April 13, OPEC raised its demand forecast by 190,000 b/d from its March estimate, expecting consumption to average 96.46 million b/d this year, citing economic stimulus programs and a further easing of COVID-19 lockdown measures.
Year on year, global oil demand was projected to grow 5.95 million b/d in 2021, compared with the 5.89 million b/d forecast in March.
Only two weeks ago, OPEC cut its 2021 oil demand growth forecast by about 5% to 5.6 million b/d after pressure by some members of an OPEC+ technical committee who favored maintaining tight production quotas.
OPEC and its partners ended up abruptly agreeing April 1 to loosen their quotas and add more than 2 million b/d into the market by July, banking on a more robust recovery for the global economy.
The OPEC+ alliance will raise its collective output caps by 350,000 b/d in May, another 350,000 b/d in June, and 441,000 b/d in July.
At the same time, Saudi Arabia, which has been cutting an extra 1 million b/d on top of its quota to help bolster the market, will unwind it by 250,000 b/d in May, 350,000 b/d in June and 400,000 b/d in July.
Non-OPEC supply was expected to climb by 930,000 b/d in 2021, down from 950,000 b/d forecast in March, OPEC said.
As a result, the call on OPEC crude will average 27.42 million b/d in 2021, according to its analysis.
That compares with the 25.04 million b/d that OPEC pumped in March, based on an average of the six secondary sources used by the organization to track member output.
OPEC+ cuts have led to reduced crude stocks in the market. Oil inventories in February were 29 million barrels above the five-year average that the alliance has targeted, the lowest since April 2020, OPEC said.
Global oil demand, which slumped last year as the pandemic put the brakes on land and air travel, is set to reclaim 96% of 2019 demand, according to the OPEC report.
The slow momentum of 2020 gathered speed in Q1 2021, with demand revised 400,000 b/d higher than estimated last month on a favorable economic outlook and more widespread vaccinations. By Q4 2021, global oil demand will average 99.45 million b/d, compared with 99.98 million b/d in 2019.
"Risks will remain high during 2021, subject to COVID-19 developments, and the pace of reaching herd immunity targets," OPEC said.
"Developments in labor markets, the structural impact of the pandemic on demand, new energy policies and the effectiveness of the large scale monetary and fiscal stimulus measures are factors that will further impact oil demand in the short term."