A Covid-19 vaccine is unlikely to ride to the oil market’s rescue until late next year at the earliest, the International Energy Agency said on Thursday.
The cautious tone from the Paris-based body comes a day after Opec said demand for the cartel’s barrels next year would be less than it had anticipated a month ago. The weaker demand outlook, combined with rising supply, is putting pressure on global producers to hold back output to support prices, analysts say.
“It is far too early to know how and when vaccines will allow normal life to resume. For now, our forecasts do not anticipate a significant impact in the first half of 2021,” the IEA said.
In its monthly report, the energy body said demand for 2020 would come in lower than initially forecast as the number of coronavirus cases surged again across Europe and the US, and governments reimposed measures to halt the spread of the virus.
The IEA now expects demand to fall by 8.8m barrels a day in 2020 to 91.3m b/d, compared with the 8.4m b/d drop predicted in last month’s report.
“Vaccines are unlikely to significantly boost demand until well into next year,” the IEA added.
In 2021, demand is expected to rebound by 5.8m b/d to 97.1m b/d, with economies such as India and China expected to perform better than initially thought. While the growth rate is 300,000 b/d higher than earlier forecasts, total demand next year is still slightly lower than initially expected and 3m b/d below pre-coronavirus levels.
Meanwhile, global oil supply rose by 200,000 b/d, from the previous month, to 91.2m b/d in October. It is expected that production will rise by more than 1m b/d in November as the US recovers after hurricane-related stoppages and Libya continues to bounce back after an eight-month blockade.
“The combination of weaker demand and rising oil supply provides a difficult backdrop to the meeting of Opec+ countries due to take place on December 1,” the IEA said, referring to the expanded group that includes non-Opec countries such as Russia. “Unless the fundamentals change, the task of rebalancing the market will make slow progress.”
Opec+ countries are set to decide whether a plan to further ease production curbs in place since May will go ahead, even as oil prices have staged a recovery with news of a vaccine. Brent crude, the international marker, is up 10 per cent this week at slightly less than $44 a barrel, on track for its best week since June, despite analyst warnings that the vaccine will not affect supply and demand in the short term.
“The current fundamentals are too weak to offer firm support to prices,” the IEA added.