The IEA reduces the prospects for oil demand as vaccines won’t save the market anytime soon

The International Energy Agency has slashed forecasts for global oil demand amid new blockade measures and warned that the vaccine breakthrough will not revive markets quickly.

While crude oil prices rose to a 10-week high above $ 45 this week on news of Pfizer Inc.’s progress, fuel use will not experience any “significant” increase from vaccines until the second half of next year. the agency said.

The Paris-based IEA, which advises most of the major economies, slashed its oil demand projections for this quarter by 1.2 million barrels per day.

The shaky outlook for consumption, combined with increased supply in places like Libya, puts pressure on the OPEC cartel and its allies as they prepare to meet in just under three weeks, the agency said.

READ: OPEC + focuses on delay of three to six months

The OPEC + alliance led by Saudi Arabia and Russia had initially aimed at restoring some of the offer they keep offline early next year, but is increasingly focused on delaying the move.

“With a COVID-19 vaccine unlikely to save the global oil market for some time, the combination of weaker oil demand and rising oil supply provides a difficult background,” the IEA said in its monthly report. . “Unless the fundamentals change, the task of rebalancing the market will make slow progress.”

Swollen stocks

If OPEC + proceeds with its projected supply increase of nearly 2 million barrels per day in January, producers will fail to run out of global oil stocks during the first quarter, the agency said. Bringing inventories, swollen by this year’s slump in demand, back to normal levels was one of the coalition’s key objectives.

Data now available for the third quarter suggests that inventories fell by just a third of the expected amount, down 800,000 barrels per day, the IEA said.

Global oil consumption is on track to drop by as much as 8.8 million barrels per day this year, averaging 91.3 million barrels per day, according to the IEA. It also cut its estimates for 2021, lowering its first-quarter projection by 700,000 barrels per day, although demand is still set to stage a 5.8 million barrel rebound on average next year.

In addition to the challenge of deteriorating demand, the Organization of Petroleum Exporting Countries also faces a surprising recovery in supply. World production could increase by 1 million barrels a day this month as the US recovers from hurricane disruptions and as Libya resumes exports, the agency said.

Libya, one of three OPEC nations exempted from the agreement to limit production, tripled production to 450,000 barrels a day last month as its political turmoil subsided, the IEA said. It is now pumping more than 1 million barrels a day and could average just below this level in November, the agency predicted.