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OPEC’s analysts on Dec. 14 painted a much gloomier view of the oil market in 2021 -– and yet indicated that the bloc and its allies can afford to be more aggressive with their planned increase in crude production in the months ahead.
In its closely watched oil market report, OPEC revised down its estimate of global demand from last month’s forecast by a chunky 1 million b/d for the first quarter of 2021 and 620,000 b/d for the second quarter, citing high uncertainty about the trajectory of COVID-19, as well as societal shifts away from travel.
Even so, the analysis showed that the so-called call on OPEC -– or how much of the bloc’s crude production will be needed to balance global supply and demand -– will remain sizably higher than what it pumped in November.
The call is pegged at 26.32 million b/d for Q1, rising to 27.52 million b/d in Q2, compared to OPEC’s November production of 25.11 million b/d, as assessed by independent secondary sources used by the secretariat to track member output.
Faster availability of coronavirus vaccines could provide more upside to the forecasts, OPEC said in the report.
“The latest resurrection of COVID-19 infections and the associated consequences of lockdowns and/or voluntary social distancing measures are leading to a slowdown in Q4 2020, with the expectation of a spillover into H1 2021,” the report said. “While the availability of a vaccine is certainly providing the base for a recovery, related developments remain to be seen.”
Month-to-month OPEC+ decisions
OPEC and its allies, including Russia, agreed on Dec. 3 after a week of contentious talks to raise their aggregate crude oil production by 500,000 b/d in January and meet monthly to decide subsequent output levels.
Acting as the world’s collective swing producer, the alliance, known as OPEC+, has typically set production levels for at least six months at a time, but members said the more active approach would enable the alliance to closely tailor their output as market conditions warrant.
The group will next meet Jan. 4, while a key monitoring committee chaired by Saudi Arabia and Russia will convene Dec. 16.
The report guides the OPEC+ discussions and forms the basis of the market scenarios prepared by the OPEC secretariat’s analysis arm for the policy negotiations.
The study forecast that global oil demand in 2021 will average 93.97 million b/d in Q1 and rise significantly in Q2 to 95.68 million b/d.
For the full year, demand will average 95.89 million b/d, a rebound of 5.90 million b/d from 2020, led by growth from the Americas and China, but 370,000 b/d less than OPEC forecast in last month’s report.
Non-OPEC supply, meanwhile, will average 62.54 million b/d in Q1 and 62.97 million b/d in Q2. Full-year 2020 will average 63.52 million b/d, up 850,000 b/d from 2020.
Within OPEC, Libya’s rapid return to production after a ceasefire between warring groups has somewhat complicated the group’s policy-making. Secondary sources estimated that Libya surged 660,000 b/d to 1.11 million b/d in November.
Further gains of up to 200,000 b/d are possible, but analysts have said the situation remained volatile and that stability has yet to be achieved.
Source: Platts