The Organisation of Petroleum Exporting Countries (OPEC) has raised its forecast for crude oil demand growth this year on the back of an expected stronger economic recovery.
The cartel, in its April Monthly Oil Market Report (MOMR), said demand would rise by 5.95 million barrels per day (bpd) in 2021, or 6.6 per cent, up by 70,000 bpd from last month.
Also yesterday, the Nigerian National Petroleum Corporation (NNPC) reported an improvement in the supply of gas for power generation, saying that along with its Joint Venture (JV) partners, it produced a total of 223.55 Billion Cubic Feet (BCF) of natural gas in January 2021.
OPEC stated that the upward revision mainly took into account a stronger economic rebound than assumed last month, propelled by stimulus programmes and a further relaxation in COVID-19 measures.
The revision marks a change of tone from previous months, in which OPEC has lowered demand forecasts because of continued lockdowns.
As expected, oil gained further towards $64 a barrel after the report was released, although still a far cry from $70 it hit a few weeks ago.
OPEC made a small upward revision in its 2021 demand projection last month, but it has steadily lowered the forecast from seven million bpd expected in July 2020.
The group hiked its forecast of 2021 world economic growth to 5.4 per cent from 5.1 per cent, assuming the impact of the pandemic is “largely contained” by the beginning of the second half of the year.
“The global economic recovery continues, significantly supported by unprecedented monetary and fiscal stimulus. The recovery is very much leaning towards the second half of 2021,” OPEC stated.
It projected that the bulk of consumption growth this year would take place in the second and third quarters, with global demand expected to rise.
However, the organisation revised lower its oil demand estimates for the first half of this year due to new virus waves and resulting lockdowns in Europe, as well as “sluggish” first-quarter demand data.
It said the fragile and uncertain recovery would require vigilant monitoring of market developments, which included the possibility of new COVID-19 variants, rising sovereign debt in most economies and a potential further rise in inflation that could tighten monetary policies.
It estimated non-OPEC liquids supply for 2021 at 63.83mn b/d, up by 930,000 b/d from 2020.
It said there had been “sizeable drawdowns” in global inventory levels since the middle of 2020, which might continue in the coming months.
OPEC and its allies agreed earlier this month to boost their collective output by more than two million barrels a day over the coming months, betting on resurgent demand.
There has been a faltering oil price rally, which has stalled in recent weeks as some of Europe’s largest economies reimposed tight coronavirus restrictions.
The International Energy Agency (IEA) had dismissed the idea that oil was entering a “supercycle” of low supply and climbing demand, pointing to glutted global oil inventories.
OPEC has maintained supply discipline that has allowed it to regain control of oil prices since they crashed last year amid a price war and the effects of the pandemic on demand.
