OPEC Cuts 2021 Oil Demand Forecast

• ▶In this month’s report, OPEC revised downward its 2021 estimate due to lower-than-expected actual data for the first three quarters of the year

• ▶In its closely watched Monthly Oil Market Report (MOMR) on Wednesday, the cartel kept its 2022 oil demand growth forecast unchanged at 4.2 million bpd

OPEC expects this year’s global oil demand to grow by 5.8 million barrels per day (bpd) from the low 2020 levels, down from last month’s estimate of 5.96-million-bpd annual growth.

In its closely watched Monthly Oil Market Report (MOMR) on Wednesday, the cartel kept its 2022 oil demand growth forecast unchanged at 4.2 million bpd to average total global demand of 100.8 million bpd next year.

Last month, OPEC had raised its 2022 oil demand forecast by 900,000 bpd, expecting the surge of the Delta variant to partially delay the oil demand recovery into the next year with robust economic growth and stronger recovery in fuel consumption.

In this month’s report, OPEC revised downward its 2021 estimate due to lower-than-expected actual data for the first three quarters of the year and “despite healthy oil demand assumptions going into the final quarter of the year.”

Global oil demand in the fourth quarter will be driven by a seasonal increase in petrochemical and heating fuel demand, as well as the potential switch from natural gas to petroleum products due to the high gas prices, the cartel noted.

In recent weeks, there has been growing interest in switching from gas to oil, and “Should this trend continue, fuels such as fuel oil, diesel, and naphtha could see support, driven by higher demand from power generation, refining and petrochemical use,” OPEC said.

If Q4 is colder than average, heating oil markets could be supported, especially in December 2021, but this boost to demand could be offset by lower gasoline consumption, said OPEC.

“Looking ahead, despite expectations of a seasonal pick-up in heating oil demand, as well as a potential switch from natural gas to liquid fuels, product markets are expected to see some weakness during the coming winter due to higher refinery throughput leading to ample supply,” the cartel noted.

The slight downgrade to 2021 global oil demand, however, didn’t result in any downgrade for 2022 demand, which OPEC still sees as “supported by healthy economic momentum in the main consuming countries and better management of the COVID-19 pandemic.”