The Organisation of Petroleum Exporting Countries (OPEC) on Thursday pruned the demand outlook for crude oil in the next two quarters, in keeping with the group’s plans to keep a tight rein on the supply of the commodity.
The cartel cut its projection for the amount of crude its members will need to pump in the second quarter by 690,000 barrels a day, citing ongoing lockdown measures and other pandemic-related developments.
OPEC, in the March edition of its Monthly Oil Market Report, projected that Nigeria’s Gross Domestic Product (GDP) would expand in the medium-term due to rising oil prices and the positive trajectory of the COVID-19 vaccine in the country.
Data released by OPEC showed that Nigeria’s oil production increased by 161,000 barrels per day in February compared to the previous month.
It stated that while in December last year, the country produced 1.375 million barrels, in January 2021, Nigeria drilled 1.328 million barrels of oil per day and produced 1.488 million barrels per day in February, quoting secondary sources.
On why demand was revised down, OPEC said: “Ongoing lockdown measures, voluntary social distancing and other pandemic-related developments” continue to weigh on economic activities.” It, however, added that conditions should improve in the second half of 2020.
The latest figures from the 13-member group are, however, consistent with its last week’s decision in collaboration with its allies to refrain from restoring any more of the production halted during the heat of the coronavirus pandemic which saw the price of West Texas Intermediate (WTI) spiralling into the negative territory.
At its meeting last Thursday, the coalition surprised traders who had widely expected OPEC+ to agree to revive about 1.5 million barrels a day and thereby propelled prices to a 14-month high above $70 a barrel, raising questions over whether producers now risk over-heating global markets.
In the latest monthly report, the cartel reduced its overall forecasts for the volume of crude it will need to provide this year by 250,000 barrels a day, compared to last month’s report.
It was understood that the group is pumping considerably below level, as it attempts to deplete surplus oil inventories that accumulated during the pandemic, with the de facto leader, Saudi Arabia, implementing extra cutbacks to speed up the market’s rebalancing.
OPEC expects the demand outlook to brighten in the second half of 2021, boosting projections for global oil demand in the fourth quarter by 970,000 barrels a day and requirements for its crude in that period by 400,000 a day.
“By the end of the first half, economic activity is expected to accelerate as the impact of the pandemic is expected to taper off. This momentum will be supported by pent-up demand, especially in contact-intensive service sectors such as tourism and travel,” OPEC said in the report.
On Nigeria, the cartel stated that with rising oil prices, the country is expected to record modest growth.
OPEC stated that Nigeria’s real GDP expanded by 0.1 per cent y-o-y in the last quarter of 2020, after a 3.6 per cent contraction in 3Q20, adding that this marked the first positive quarterly growth in 2020 amid the gradual return of economic activity following the easing of COVID-19-related restrictions and oil price improvements.
Emmanuel Addeh in Abuja