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Demand for OPEC’s crude oil is set to bounce back next year at a historically quick pace, the global coalition said in its July report published Tuesday.
OPEC expects demand for its product to spike roughly 25% to 29.8 million barrels per day in 2021, bringing it slightly above levels seen in 2019. The group’s forecast for 2020 demand crept 200,000 barrels per day higher to 23.8 million barrels per day.
Total oil demand won’t fare as well, OPEC said. Next year is expected to show demand jumping 7 million barrels per day to 97.7 million barrels per day. Yet the historically large increase still fails to retrace the 8.9 million barrels per day decline forecasted for 2020.
Demand for gasoline, diesel, and other oil products are projected to recover by a record amount, OPEC said. However, “efficiency gains, including teleworking and teleconferencing, may cap oil demand gains in 2021 to remain below pre-crisis levels of 2019,” the group added.
Oil prices have largely stabilized near $40 per barrel after plummeting in April. West Texas Intermediate crude futures briefly slid to negative prices that month as storage options dried up and stifled demand failed to address a supply glut. Brent crude, oil’s international benchmark, plummeted but remained at positive levels.
Crude demand has since been closely monitored to see whether virus containment and economic reopenings can bolster the critical market. Producers around the world slashed production through the second quarter to help prices recover. OPEC issued record-breaking production cuts as well, but the curbs aren’t set to last.
The coalition is expected to begin rolling back its production curbs during a meeting scheduled for Wednesday. While some view such retracing as necessary to match a steady uptick in demand, others fear spiking coronavirus case counts can stop the commodity market rally in its tracks.
OPEC acknowledged the concerns in its Tuesday report, adding “the latest deteriorating developments in additional COVID-19 cases do not engender optimism going forward.” The reinstatement of lockdowns in California, Florida, and Texas stand to drag further on travel activity and overall demand. A second wave of the pandemic could damage the oil-demand recovery, OPEC said.
WTI contracts for August delivery traded at $40.25 per barrel as of 2:40 p.m. ET. Brent crude traded at $42.87 per barrel.
