Opec reiterates global oil demand forecast for 2021

Opec reiterated its 2021 forecasts for world oil demand on Tuesday, as it nudged its predictions for global economic growth higher.

Publishing its monthly oil report, the Organization of the Petroleum Exporting Countries said it expected world oil demand to increase by 6.0m barrels per day in 2021, unchanged on April’s estimate, to average 96.5m bpd.

It acknowledged that weaker-than-expected demand and the resurgence of Covid-19 in India and Brazil had caused oil demand data for the first quarter to be revised down.

But the cartel added: “Positive transportation fuel data in the US and acceleration in vaccination programmes in many regions provides further optimism in the second half. The assumed return to some degree of normality and improved mobility is also expected to positively affect regions such as the Middle East and Other Asia in the second half.”

The Vienna-headquartered cartel is predicting that the global economy will grow by 5.5% year-on-year in 2021, a 0.1 percentage point increase on its previous prediction, supported by stimulus measures in the US and an “accelerating recovery” among Asian economies.

But it warned: “Global economic growth for 2021 remains clouded by uncertainties, including but not limited to, the spread of Covid-19 variants and the speed of the global vaccine rollout.” It also revised down India’s forecast for economic growth to 9.7% in 2021.

Opec and its allies, known as Opec+, have already agreed to gradually increase the supply of oil from this month.

Commenting on the outlook for OPEC production, Caroline Bain at Capital Economics predicted that country's compliance with their individual output quotas would "remain good initially".

However, she added: "compliance could slip in Q3 as demand picks up, at a time of relatively high prices. Our forecasts assume some slippage in the second half of this year."

Indeed, she had penciled-in a stronger rebound in oil demand for later in 2021 as pandemic-related restrictions are eased, which she said would free up "considerable" pent-up demand for travel and leisure activities.

As at 1400 GMT, Brent crude was trading around $67 per barrel, and West Texas Intermediate around $64 per barrel. The oil price has risen steadily this year, boosted by the successful vaccine rollout, growing hopes for a global economic recovery and the prospect of supply cuts.