The International Energy Agency (IEA) has slashed its projections for 2021 on the heels of rising COVID-19 cases, the emergence of new strains, and renewed measures to prohibit mobility in several countries.
According to the IEA’s latest report, it amended forecasts for demand in 2021 by 280,000 barrels a day to 5.5 million barrels a day. The outlook focused mainly on the start of the year, with a 600,000-barrel-a-day cut to its forecasts for the first quarter, and a 300,000-barrel-a-day cut to its forecasts for the second quarter.
While global efforts to roll out vaccines for the coronavirus are underway and are expected to bring an end to the movement restrictions that battered oil demand in 2020, spiraling infection rates have sparked a return to lockdowns in some countries, delaying the expected rebound in demand, the IEA said.
“Border closures, social distancing measures, and shutdowns, among other policies, will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year. Frigid temperatures recorded in Asia and Europe over January will only partially offset the impact of the stricter policies,” the IEA said.
Further to this, the IEA deepened its forecasts for the contraction in global oil demand in the fourth quarter of 2020 by 200,000 barrels a day, meaning the quarter saw a 6.4 million-barrel-a-day drop in demand. This was due to the fact that oil supply remained steady, the agency said while adding that global supply was 92.8 million barrels a day in December, a modest increase on the previous month.
It should be noted that the IEA’s comments echo those made by the Organization of the Petroleum Exporting Countries (OPEC) last week in its own report. The cartel which strives to ensure the stabilization of oil markets had said that coronavirus lockdown measures and rising infection rates mean appetite for oil would remain subdued in the first quarter of the year.