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Excitement over the rollout of the coronavirus vaccine today had oil prices surging this morning, but the rally fizzled after OPEC put out its monthly oil market report. Citing further uncertainty in the transportation sector caused by surging cases of COVID-19, the group lowered its estimates for a recovery in demand next year.
OPEC had previously expected demand to grow by 6.3 million barrels per day (mb/d) in 2021, but the cartel now anticipates that growth will be 5.9 mb/d. Estimates for 2021 demand have been continuously decreasing since July 2020, when 2021 growth was expected to be 7.0 mb/d.
The revised forecast is due to uncertainty related to how rising COVID-19 cases in certain parts of the world will affect the transportation sector through the first half of 2021.
A further decrease in oil demand is more bad news for energy giants like Chevron and Exxon. Both companies have recently announced large cuts to capital spending plans.
Oil prices, of course, rely on both supply and demand. The group of oil-producing nations known as OPEC+ had already agreed to keep production throttled back into 2021.
