In its latest report, the International Energy Agency (IEA) has revised down its forecast for oil demand growth this quarter.
In the report, the IEA points at continuing lockdown restrictions in many developed countries stifling the demand for fuels and slowing the recovery of oil demand, adding:
“For now, a resurgence in Covid-19 cases is slowing the rebound, but a widespread vaccination effort and an acceleration in economic activity is expected to spur stronger growth in the second half of the year.”
It has, therefore, pared back its demand forecast for this year by 300,000 barrels per day (bpd), with the first quarter seeing the biggest hit with a 600,000 bpd reduction.
Nevertheless, the IEA still expects oil demand to increase by 5.5 million bpd overall this year, reversing much of last year’s decline of 8.8 million bpd that was caused by lockdowns around the world and subsequent travel restrictions. This is good news for oil and lubricant producers like ExxonMobil, Shell and BP, which were forced to slash capital investment in upstream operations in the face of low oil prices.
The report also points to the OPEC+ group’s continued discipline in limiting production, saying this may help eat into the large inventories of crude oil that built up in early 2020 and exacerbated the price drops caused by the COVID-19 pandemic. It also plays down the prospect of any production increases by US shale producers, saying they appear content to use any price gains to increase investors’ returns or reduce debt.