The Organization of Petroleum Exporting Countries and its allies (OPEC+) have revised oil demand scenarios for 2021 with demand seen weaker than previously anticipated, according to a confidential document seen by Reuters.
The Joint Technical Committee (JTC), said in a report: “For 2021, oil demand is expected to grow by 6.2 million barrels per day (mmbbl/d), year on year, representing a downward revision of 0.3 mmbbl/d compared to last month’s assessment”. The fact that oil demand has been downgraded further supports the case for a tighter supply policy next year, instead of relaxing cuts at the beginning of 2021.
This news surfaces despite strong compliance with OPEC+ cuts in October, which reached 101%. The OPEC statement attested that between May and October the alliance had reduced global supply by 1.6 bbbl.
It is reported that the most favored deal on the table to solve the oversupply issue is maintaining the existing curbs of 7.7 mmbbl/d for a further three to six months. The original plan was to taper the cuts to 5.7 mmbbl/d in January. It would be ill-advised to taper cuts with fuel demand still weak.
OPEC+ will have a full meeting on November 30 and December 1 to decide the output policy for 2021.