The Organization of Petroleum Exporting Countries (OPEC) has increased its oil demand outlook for 2021 with 190,000 barrels per day, expecting consumption to average 96.46 million b/d in the year.
The producer bloc stated in its latest monthly oil market report that economic stimulus programs by advanced economies and a further easing of COVID-19 lockdown measures would positively translate to demand recovery and warrant increased crude oil supplies in the next few months.
OPEC stated in the report that global oil demand would now grow by 5.95 million b/d in 2021instead of the 5.89 million b/d earlier projected in March.
The groups of producers had at the end of March cut its 2021 oil demand growth forecast by about 5% to 5.6 million b/d following recommendation by technical committee to maintain tight production quotas, and later add some 2.0 mbd of production to meet expected surge in demand from recovering global economy.
According to a report by Platts, OPEC+ alliance will raise its collective output caps by 350,000 b/d in May, another 350,000 b/d in June, and 441,000 b/d in July.
At the same time, Saudi Arabia, which has been cutting an extra 1 million b/d on top of its quota to help bolster the market, will unwind it by 250,000 b/d in May, 350,000 b/d in June and 400,000 b/d in July.
Non-OPEC supply was expected to climb by 930,000 b/d in 2021, down from 950,000 b/d forecast in March, OPEC said.
As a result, the call on OPEC crude will average 27.42 million b/d in 2021, according to its analysis.
That compares with the 25.04 million b/d that OPEC pumped in March, based on an average of the six secondary sources used by the organization to track member output.
OPEC+ cuts have led to reduced crude stocks in the market. Oil inventories in February were 29 million barrels above the five-year average that the alliance has targeted, the lowest since April 2020, OPEC said.
Global oil demand, which slumped last year as the pandemic put the brakes on land and air travel, is set to reclaim 96% of 2019 demand, according to the OPEC report.
The slow momentum of 2020 gathered speed in Q1 2021, with demand revised 400,000 b/d higher than estimated last month on a favorable economic outlook and more widespread vaccinations. By Q4 2021, global oil demand will average 99.45 million b/d, compared with 99.98 million b/d in 2019.
“Risks will remain high during 2021, subject to COVID-19 developments, and the pace of reaching herd immunity targets,” OPEC said.
“Developments in labor markets, the structural impact of the pandemic on demand, new energy policies and the effectiveness of the large scale monetary and fiscal stimulus measures are factors that will further impact oil demand in the short term.”