Coronavirus Resurgence Is Delaying Rebound in Oil Demand, IEA Says
January 19 2021 - 4:29AM
Dow Jones News
By Will Horner
A resurgence of Covid-19 cases and fresh lockdowns are weighing
on oil consumption and slowing a rebound in demand, the
International Energy Agency said Tuesday.
In its monthly oil market report, the IEA cuts its forecasts for
demand in 2021 by 280,000 barrels a day to 5.5 million barrels a
day. The bleaker 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," the IEA said.
"Frigid temperatures recorded in Asia and Europe over January
will only partially offset the impact of the stricter policies,"
the Paris-based agency said.
Demand had been recovering steadily in 2020, but the rebound
slowed considerably in November and went into reverse in December,
the IEA said, as more transmissible strains of the virus were
detected and an uptick in cases coincided with cold weather in the
northern hemisphere.
The IEA also 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.
That came as oil supply remained steady, the agency said. Global
supply was 92.8 million barrels a day in December, a modest
increase on the previous month.
Oil prices rose slightly Tuesday, with Brent futures, the global
oil benchmark, up 1% at $55.27 a barrel. West Texas Intermediate,
the U.S. benchmark, rose 0.3% to $52.56 a barrel. Oil prices have
been steadily rising from their historic lows in April during the
worst of the pandemic.
The IEA's comments echo those made by the Organization of the
Petroleum Exporting Countries last week in its own report. The
cartel said that coronavirus lockdown measures and rising infection
rates mean appetite for oil would remain subdued in the first
quarter of the year.
The Saudi-led cartel and its allies, known collectively as
OPEC+, agreed earlier this month to keep their total production
flat. Saudi Arabia also said it would unilaterally cut 1 million
barrels a day of its oil output, signaling the kingdom's unease
over the resurgence of Covid-19 cases. The Saudi cuts are set to
begin next month.
Write to Will Horner at will.horner@wsj.com
(END) Dow Jones Newswires
January 19, 2021 04:14 ET (09:14 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.