Global oil demand will be lower in 2021 than previously expected, the International Energy Agency said on Tuesday, as renewed lockdowns to contain the coronavirus pandemic hit consumption.
The IEA said oil demand would be 600,000 barrels a day lower than previously forecast in the first quarter of 2021 and 300,000 b/d lower for the year as a whole, although it still expects a strong recovery in the second half of the year as vaccinations accelerate.
“It will take more time for oil demand to recover fully as renewed lockdowns in a number of countries weigh on fuel sales,” the IEA said in its closely watched monthly report.
“[But] the global vaccine rollout is putting fundamentals on a stronger trajectory for the year.”
Overall global oil demand is now expected to rise by 5.5m b/d in 2021 to 96.6m b/d after falling by 8.8m b/d in 2020. But it is not expected to recover to pre-pandemic levels of around 100m b/d until 2022 at the earliest.
By the fourth quarter of this year demand is forecast to reach just 99m b/d, although this does imply a recovery between now and March of roughly 5m b/d.
“Vaccination campaigns take time,” the IEA said. “We assume that the vaccination campaigns will start to have an impact on mobility and transport fuel demand in the second half of 2021.”
The IEA said it still saw the potential for global oil inventories to draw down substantially this year, however, as Opec and its allies have increased the size of agreed production cuts designed to help balance the market and bolster prices.
“Assuming Opec+ achieves 100 per cent compliance with the latest agreement, global oil stocks could draw by 1.1m b/d, or 100m barrels in the first quarter with the potential for much steeper declines during the second half of the year as demand strengthens,” the IEA said.
World oil supply is expected to rise by 1.2m b/d in 2021 after a record fall of 6.6m b/d last year.