The Organization of the Petroleum Exporting Countries (OPEC) in its latest monthly report said that oil demand would fall by 9.06 million bpd in 2020, a deeper contraction than the 8.95 million bpd it projected last month. Oil prices have collapsed as the COVID-19 pandemic ravaged fuel consumption. Some countries have relaxed their lockdown measures, but fears of a new infection wave have kept a lid on prices.
OPEC expects oil demand to rebound by 7 million bpd in 2021. However, the cartel noted that its forecast is subject to significant uncertainties stemming from fears of a new infection wave which could curb travel and economic activity again. OPEC said jet fuel would unlikely make up for lost demand, while gasoline consumption is expected to struggle to regain pre-pandemic levels.
The collapse in oil demand also pushed inventories to 291.2 million barrels above the five-year average. Meanwhile, prices increased to above $45/barrel on August 12, but still lower than the level that many OPEC members require to balance their budgets.
OPEC and its allies agreed to slash supply by a record 9.7 million bpd starting on May 1. However, OPEC output increased by 980,000 bpd to 23.17 million bpd last month, as Saudi Arabia and other Gulf producers ended their additional voluntary cuts. OPEC output will likely increase again this month as they eased production cuts to 7.7 million bpd.
