OPEC has cut its forecast for crude oil demand growth this year, citing a weaker-than-expected recovery in India and other Asian countries, and warned risks remain “elevated and skewed to the downside” for the first half of next year.
In a closely-watched monthly report published Monday, the group of oil-producing nations downwardly revised its outlook for global oil demand to an average of 90.2 million barrels per day in 2020. That’s down 400,000 bpd from the previous month’s estimate and reflects a contraction of 9.5 million bpd year-on-year.
The report comes as energy market participants become increasingly concerned about a faltering economic recovery and stumbling fuel demand in the wake of the coronavirus pandemic.
The Middle East-dominated group, which consists of some of the world’s largest oil producers, said on Monday it had revised oil demand in OECD countries up by around 100,000 bpd due to less-than-expected declines in all sub-regions during the second quarter.
However, oil demand was revised down by 500,000 bpd in the non-OECD region due to weaker oil demand performance in Asia, particularly in India. Looking ahead, OPEC said the negative impact on oil demand in Asia was expected to persist through the first six months of 2021.
“Additionally, risks remain elevated and skewed to the downside, particularly in relation to the development of Covid-19 infection cases and potential vaccines,” the group said in the report. “Furthermore, the speed of recovery in economic activities and oil demand growth potential in Other Asian countries, including India, remain uncertain,” it added.
As such, OPEC now expects global oil demand to grow by 6.6 million bpd to an average of 96.9 million bpd next year. This updated forecast was also 400,000 bpd lower than its previous estimate.
International benchmark Brent crude traded at $39.76 a barrel on Monday, down around 0.2%, while U.S. West Texas Intermediate (WTI) stood at $37.26, roughly 0.1% lower. Oil prices have dropped around 40% since the start of the year. Marking the group’s 60th anniversary, OPEC Secretary-General Mohammad Barkindo said on Monday that the coronavirus pandemic was “one of the greatest global challenges of modern times.”
“Beyond the terrible human suffering it has caused, it has triggered one of the worst global economic recessions and oil market downturns in OPEC’s history,” he added. OPEC, alongside non-OPEC allies, a grouping known collectively as OPEC+, will meet on Sept. 17 to discuss oil production policy. The energy alliance has agreed to cut output by 7.7 million bpd until December.
“Infection rates are on the rise again, there are localized lockdowns introduced in a growing number of countries hindering regional economic growth and the number of unemployed is failing to fall significantly,” Tamas Varga, senior analyst at PVM Oil Associates, said in a research note published Monday.