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OPEC and its allies projected a strong recovery in global oil demand this year, but the outlook was clouded by a raging virus outbreak in India just days before the group’s next meeting.
A committee of technical experts from the group forecast that world oil consumption will rebound by 6 million barrels a day this year, according to delegates who attended the panel on Monday. Most of the fuel inventory glut accumulated during the pandemic will have dissipated by the end of this quarter, they estimated.
Still, the Joint Technical Committee’s report cautioned that resurgent coronavirus cases in India, Brazil and Japan “may adversely impact global economic growth,” the delegates said, asking not to be named because the meeting was private. The worsening situation in these countries could “derail the oil demand recovery.”
OPEC+ moved the meeting of its main monitoring committee to Tuesday, one day earlier than planned, according to a delegate.
The Joint Ministerial Monitoring Committee will hold a teleconference — rather than the usual video conference — at 2 p.m. Vienna time, a delegate said. The JMMC considers policy options on behalf of ministers, who are due to hold a full meeting on Wednesday.
They will consider the projections as they decide whether it’s safe to proceed with their plans to revive halted oil production. The alliance aims to restore about 2 million barrels a day over the next three months, roughly a quarter of the output currently off-line.
Assessing India
“There are positive signals regarding the global economy and prospects for our industry,” OPEC Secretary-General Mohammad Barkindo told officials at the start of the online meeting, according to a statement posted on the group’s website.
When the pandemic crushed fuel demand last year, the 23-nation alliance led by Saudi Arabia and Russia rescued the global oil industry from an unprecedented price rout by slashing production. The Organization of Petroleum Exporting Countries and its partners are now in the process of carefully restarting those supplies as economic activity resumes.
“We still think it is more likely that the producer group will continue with the gradual output increases,” Helima Croft, chief commodities strategist at RBC Capital Markets LLC, said in a report. Still, the bank doesn’t “rule out that they could take a temporary pause on planned production increases to assess the situation” in India.
The JTC’s forecast for demand growth in 2021 is more optimistic than the one it published a month ago, of 5.6 million barrels a day, though roughly in line with a report published by OPEC’s secretariat a couple of weeks ago.
The committee expects that global fuel stockpiles will decline at an average rate of 1.2 million barrels a day this year, compared with an estimate of 800,000 a day last month.
As a result, the surplus in oil inventories — relative to their 2015 to 2019 average — will be whittled down to just 8 million barrels by the end of this quarter, according to the JTC’s data. Depleting the world’s bloated stockpiles is one of OPEC’s main objectives.
