OPEC: oil consumption remains low
Tashkent, Uzbekistan (UzDaily.com) -- The Organization of Petroleum Exporting Countries (OPEC) published its November report on the state of the world oil market, which noted the following highlights.
First, oil prices have not changed. In October, oil prices remained at the same level as in September (about US$41 per barrel), falling at the end of the month to their 5-month lows amid a general panic ahead of the US elections.
Second, oil consumption remains low. According to OPEC forecasts, the average consumption in 2020 will amount to 90.01 million barrels. per day. This is 9.75 million barrels per day less than in 2019. The forecast is worsened by 0.3 million barrels per day, taking into account weaker-than-expected demand in the countries of the Americas in the third quarter, as well as the recent announcement of quarantine restrictions in Europe.
In 2021, global consumption will grow by 6.25 million barrels up to 96.26 million barrels per day, which is less than the volume of consumption in 2019.This is mainly due to the deterioration of economic growth prospects in the OECD countries due to the newly introduced restrictive measures and the concomitant negative impact on transport and industrial consumption until mid-2021.
Third, OPEC lowered its forecast for 2020 for oil supplies by non-member countries. Thus, the forecast for 2020 has been lowered to 62.73 million barrels per day, a decrease compared to 2019 may amount to 2.43 million barrels per day. Estimates for supply growth are downgraded from the October report, due to production stops in the Gulf of Mexico by US oil companies, as well as lower production in Norway, the UK and Mexico.
Production is forecast to decline in Russia, the United States and Canada, which will be offset by increased production in Norway, Brazil, China and Guyana.
Experts note that the Biden factor will also have an impact on the world oil supply. J. Biden declares the US readiness to return to the "nuclear agreement" with Iran, which Barack Obama signed and Donald Trump left.
Then the question will arise of lifting or easing numerous sanctions against Iran, including for oil. And if this happens, then the world market will receive about 2 million barrels of the Iranian oil per day.
Fourth, an increase in oil demand in 2021. In 2021, an increase in oil demand is expected, and the volume from non-OPEC countries will grow by 1.5% - to 63.68 million barrels per day. The volume of supply from OPEC is expected to increase by 23.6% - to 27.36 million barrels per day. The supply outlook has been improved for 2021, mainly due to expectations for production growth in Oman. Also, the main drivers of growth next year will remain the increase in production in the United States, Canada, Brazil and Norway.
Fifth, OPEC slightly downgraded its outlook for oil production in countries outside the organization in 2020 against the background of less-than-expected production in the United States due to the October hurricanes. The fall is projected at 2.43 million barrels per day instead of 2.4 million barrels expected in October per day.
In this context, according to Bloomberg, the UAE is dissatisfied with the distribution of quotas for production cuts and is considering the possibility of leaving OPEC +. The UAE’s withdrawal from this agreement could lead to a complete collapse of the transaction and another collapse in prices. At the same time, experts believe that the UAE will still remain in the agreement, since they, like all other oil-producing countries, do not want a repeat of the spring collapse of oil quotations.
In general, the recovery in oil demand continues at a slower pace than expected. The main reason for this is still the COVID-19 pandemic and the restrictions that have arisen from it. Even a partial return to dock levels should be expected no earlier than the second half of 2021. It is important to keep in mind that there will be no quick recovery.