An oil pump jack, also known as a “nodding donkey”, in an oil field near Dyurtyuli in the Republic of Bashkortostan, Russia, on Thursday, November 19, 2020.

Andrey Rudakov | Bloomberg | Getty Images

LONDON – Oil producing group OPEC on Thursday maintained its forecast for global oil demand growth for 2021 unchanged, but warned of uncertainties surrounding the impact of the coronavirus pandemic.

The closely watched oil market report comes as coronavirus cases continue to rise globally and new lockdowns are imposed in Europe and parts of China.

In the past few weeks, optimism about the mass rollout of coronavirus vaccines appears to have been tempered by the resurgent rate of spread of the virus.

This has resulted in oil producers trying to strike a delicate balancing act between supply and demand as factors such as the pace of the pandemic response continue to cloud the outlook.

“Uncertainties remain high going forward. The main downside risks are issues related to COVID-19 containment measures and the impact of the pandemic on consumer behavior,” OPEC said Thursday.

“That includes how many countries adjust lockdown measures and for how long. At the same time, faster vaccination schedules and a recovery in consumer confidence are driving up optimism.”

The group of 13 expected that global oil demand in 2021 will increase by 5.9 million barrels per day year-on-year to an average of 95.9 million barrels per day. The forecast remained unchanged from last month’s assessment.

The group said global oil demand growth in 2020 declined by 9.8 million barrels per day year over year to an average of 90 million barrels per day. The group found that the decline in December was slightly less than expected.

OPEC forecasts for 2021 a “healthy recovery of economic activity including industrial production, an improving labor market and higher vehicle sales than in 2020”.

“Accordingly, oil demand is expected to grow steadily this year, largely aided by transportation and industrial fuels,” the group said.

Oil prices “driven by expectations”

OPEC and its non-OPEC allies, an alliance sometimes referred to as OPEC +, cut oil production by a record amount in 2020 to support prices as tough public health measures worldwide came with a shock fuel demand collapsed.

OPEC + initially agreed to cut production by 9.7 million bpd, before the cuts were lowered to 7.7 million and finally further reduced to 7.2 million from January. OPEC king Saudi Arabia has since announced that it will cut production by another 1 million barrels per day in February and March to prevent inventory build-up.

The international reference Brent crude oil futures were trading at $ 55.77 a barrel on Thursday, down 0.5% for the session, while the US West Texas Intermediate (WTI) futures were trading at $ 52.76 and were thus 0.3% lower. Oil prices are currently up for the third year in a row.

“Anyone who has their finger on the pulse of the oil market knows that expectations are currently driving prices rather than immediate realities,” said Tamas Varga, senior analyst at PVM Oil Associates, in a research note.

“Those who disagree are advised to take a quick look at forecasts of oil demand for the first half of 2021 over the past few months and compare those estimates with price developments,” he added.

Before the release of its oil market report on Thursday, OPEC had steadily lowered its forecast for demand growth for 2021.

Other major oil forecasters, including the International Energy Agency and the US Energy Information Administration, have also downgraded their estimates for oil demand growth for 2021 in recent weeks.