The Organization of the Petroleum Exporting Countries (OPEC) in its July Monthly Oil Market Report (MOMR) said that oil market fundamentals in 2020 had been ravaged by the unprecedented and devastating impact of the coronavirus pandemic. However, gradual stabilization is expected to begin in the remaining half of 2020 as countries started to lift their virus containment measures.
Global oil demand is projected to recover strongly in 2021 after a deep downturn in 2020. OPEC forecast that the world’s oil demand would increase by about 7.0 million bpd, but even with such record growth, oil demand in 2021 would unlikely hit the pre-pandemic level. OECD and non-OECD are expected to contribute to 3.5 million bpd growth, respectively, with China and other Asian countries accounting for 2.4 million bpd.
The increased demand is in line with the expected expansion in global GDP in 2020. The world’s economy is expected to grow by 4.7% next year, after experiencing an estimated 3.7% contraction this year. Improving economic activity is expected to boost gasoline and diesel consumption which are forecast to increase by more than 3.8 million bpd in 2021, the record year-on-year gain for both fuels. Meanwhile, demand for jet fuel is expected to increase slightly by 0.8 million bpd as international travel will likely remain under pressure.
The expected recovery in demand and prices are expected to push non-OPEC oil supply from a deep contraction this year to increase by 0.92 million bpd next year. OPEC expects US oil production to edge up 0.24 million bpd in 2020, slowing down from 2.3 million bpd and 1.7 million bpd expansions in 2018 and 2019, respectively. The output from Norway, Brazil, and Australia is also expected to increase, while production from Egypt, Mexico, Thailand, Colombia, and Kazakhstan is expected to decline naturally.
