The oil cartel revised its 2020 demand forecast lower by 0.3 million barrels per day to slightly above 90 million. The new forecast projects a decline of 9.8 million bpd on an annualized basis.
“As new COVID-19 infection cases continued to rise during October in the US and Europe, forcing governments to re-introduce a number of restrictive measures, various fuels including transportation fuel are thought to bear the brunt going forward,” OPEC said in its November 2020 report released Wednesday.
More than 580,000 new COVID-19 infections were reported on Nov. 6, the last day worldwide figures were available. The virus has infected 51.7 million people globally and almost 1.3 million.
While shutdowns aimed at slowing the spread of the virus are expected to curb demand, supply will increase as OPEC members and their allies reduce the size of their supply cuts, and production from Libya continues to normalize, after the lifting of a force-majeure blockade.
The so-called OPEC+ group is set to reduce its current 7.7 million bpd supply cut by around 2 million bpd beginning in January. OPEC could still extend the cuts at its upcoming meeting on Dec. 1.
The alliance in April agreed to slash production by a record 9.7 million bpd as governments around the world ordered citizens to eliminate nonessential travel amid the early months of the pandemic, resulting in global oil demand falling by 25 million to 30 million bpd.
The demand shock caused oil prices to plunge with Brent crude oil, the international benchmark, plunging by as much as 77% from its January peak to $15.98 per barrel and West Texas Intermediate crude oil, the U.S. standard, hitting a record $41.65, respectively, as demand has returned to the market.
OPEC remains concerned the “structural impact of the pandemic” will linger well into 2021 despite the possibility a vaccine will be distributed during the first half of the year.