The Organisation of Petroleum Exporting Countries (OPEC), projected Thursday that world oil demand in 2021 will rebound more slowly than previously thought but added that it will pick up in the second quarter of this year.
The international oil cartel also forecasted that the prevailing rise in oil prices could brighten early economic recovery for the country, resulting in a medium-term Gross Domestic Product (GDP) expansion.
In its monthly report for February, OPEC projected that demand will rise by 5.79 million barrels per day (bpd) this year to 96.05 million bpd, trimming its growth forecast by 110,000 bpd from a month ago.
The prospect of weaker demand has already prompted OPEC and its allies, known as OPEC+, to slow their plan to boost output.
But more demand, rising prices, and lower rival supply could support the case for more easing, even as Iraq said on Wednesday OPEC+ was likely to keep current cuts in March.
“While the global economy is showing signs of a healthy recovery in 2021, oil demand is currently lagging but is forecast to pick up in the second half of 2021,” OPEC said in the report.
OPEC has steadily lowered its 2021 oil demand growth forecast from 7 million bpd expected in July. Still, the latest forecast is stronger than the prediction made in an earlier internal OPEC report.
The group raised its forecast of world economic growth this year to 4.8 per cent from 4.4 per cent previously, despite the impact of “challenges” such as COVID-19 variants and the effectiveness of vaccines.
“The global vaccination rollout is gaining pace, infection rates are falling in some areas, improvements in treatment, and the growing use of rapid testing facilities all lend support to an acceleration of economic activity after the first quarter,” OPEC said.
On its forecast for Nigeria, it stated: “The meaningful rise in of oil prices following the recent Declaration of Cooperation (DoC) decisions, along with a positive trajectory from Covid-19 vaccines, could brighten the 2021 outlook and lay the groundwork for a hopeful medium-term real GDP expansion.
“Moreover recent data showed that consumer confidence in Nigeria increased to 14.80 points in 4Q20 from -21 20 points in 3Q20.
“However, recent Central Bank of Nigeria composite Purchasing Managers Index (PMI) for the manufacturing sector edged down to 49.6 in December 2020 from 50.2 in November, signaling a renewed contraction in the country’s manufacturing activity.”
For shale, OPEC trimmed its non-OPEC supply growth forecast to 670,000 bpd this year from 850,000 bpd previously, and said output of U.S tight crude, another term for shale, would decline despite higher oil prices.
“Supply from the U.S. is challenged by short-term uncertainties around Covid-19 (and) continued capital expenditure discipline leading to lower upstream capital spending by US oil companies,” OPEC said.
Last month, OPEC raised its forecast for US shale output this year, in a sign higher oil prices were helping a key competitor.
OPEC+ producers cut supply by a record 9.7 million bpd last year to support the market and agreed to pump an extra 500,000 bpd in January under a plan to unwind the curbs gradually. Most producers are returning to supply restraint this month and in March.
OPEC crude production in January rose by 180,000 bpd to 25.50 million bpd, the report said, led by Saudi Arabia, Iran, and Venezuela. This is less than the 300,000 increase allowed under the OPEC+ plan for January.