OPEC+ ‘optimistic’ for 2021 rebound in oil demand

“The gradual rollout of vaccines around the world is a positive factor for the rest of the year, boosting the global economy and oil demand,” an OPEC+ statement said.
Thursday 04/02/2021
3D printed oil pump jack is seen in front of displayed stock graph and Opec logo in this illustration picture, April 14, 2020. (REUTERS)
3D printed oil pump jack is seen in front of displayed stock graph and Opec logo in this illustration picture, April 14, 2020. (REUTERS)

LONDON--Members of the OPEC group of oil producers and their allies met Wednesday and expressed confidence in prospects for a global economic recovery and attendant rise in crude oil demand.

“As mass vaccination programmes continue and the macro-economic situation improves, there is a growing optimism over global oil demand,” Russian Deputy Prime Minister Alexander Novak was quoted by the Ria agency as saying.

He spoke during a videoconference meeting of OPEC+’s monthly Joint Ministerial Monitoring Committee (JMMC).

A statement published after the meeting said all participants were “optimistic” for a “year of recovery in 2021.”

“The gradual rollout of vaccines around the world is a positive factor for the rest of the year, boosting the global economy and oil demand,” the statement said.

An uptick in economic and travel activity fuelled by COVID-19 vaccines could accelerate in the second half, analysts said, but the recovery will take time.

“It’s time to take a breather now, as demand will stay low in the near future because of the ongoing lockdowns,” LBBW analyst Frank Schallenberger said.

OPEC’s optimism has been reflected in oil markets since early November, with benchmark crude contracts now trading at around $60 per barrel — levels last seen in early 2020.

Prices have also been supported by OPEC+ countries agreeing to production cuts in the wake of the coronavirus-induced plunge in demand last spring.

Those cuts have continued into 2021, with a reduction of 7.2 million barrels per day in January, 7.125 million bpd planned for February and 7.05 million bpd in March.

In addition, OPEC mainstay Saudi Arabia has volunteered to a cut a million extra barrels per day from its production in February and March.

“We expect OPEC+ to gradually lift production in April-May in line with rising demand, but to keep the overall quota system in place until early 2022,” Economist Intelligence Unit analyst Cailin Birch said, adding demand should recover to 2019 levels in 2023.

“The OPEC+ production strategy is working,” said analyst Jeffrey Halley of Oanda.

Few analysts had expected a dramatic JMMC meeting Wednesday, with more heated discussion on the way forward possible at the next full OPEC+ ministerial meeting on March 4.