Happy birthday, OPEC! The cartel turns 60 today. Unfortunately, OPEC has some not so great birthday news to share.
In its Monthly Oil Market Report released on Monday, OPEC cut its outlook for world oil demand for this year and next. OPEC now predicts that oil demand will fall to 90.2 million barrels per day in 2020. This is 9.5 million barrels per day lower than in 2019, and an average of 400,000 barrels per day worse than the group forecasted even last month.
The slower demand is expected to mostly come from less developed members of the Organization for Economic Cooperation and Development, particularly India and other Asian countries. OPEC actually revised demand upwards by 100,000 barrels per day for more developed members of the OECD.
OPEC expects global oil demand to rise by 6.6 million barrels per day, to 96.9 million barrels per day in 2021. This is 400,000 barrels per day less than the cartel forecasted even last month. What’s more, OPEC warned that the situation could still devolve even more.
The MOMR states that, ‘[R]isks remain elevated and skewed to the downside, particularly in relation to the development of COVID-19 infection cases and potential vaccines. Furthermore, the speed of recovery in economic activities and oil demand growth potential in Other Asian countries, including India, remain uncertain.’
OPEC and allied countries, known as OPEC+, are meeting at the end of the week to discuss production. OPEC+ is currently in agreement to cut production by 7.7 million barrels per day through the end of 2020.