OPEC Reduced Crude Oil Demand for the First Quarter of 2021

The Organisation of Petroleum Exporting Countries (OPEC) on Monday lowered expected global oil consumption for the first quarter of 2021 by 1 million barrels per day.

Despite reaching an accord with non-OPEC members to ease production cuts and up supply by 500,000 barrels per day, the oil cartel is now saying global uncertainties amid the structural impact of COVID-19 on consumer behaviors will affect consumption of the commodity in the first quarter of the year even with the ongoing rollout of COVID-19 vaccines.

“Uncertainties remain high, mainly surrounding the development of the Covid-19 pandemic and rollout of vaccines, as well as the structural impact of Covid-19 on consumer behaviors, predominantly in transportation sector,” OPEC’s Vienna-based secretariat said in the report.

The price of Brent crude oil dropped from almost $51 per barrel on Monday to $49 before rebounding to $50.38 per barrel on Tuesday during the London trading session.

Experts are interpreting the pullback as temporary given the recent improvement in Chinese industrial output, the world’s largest importer of crude oil. China’s industrial output rose by 7 percent in November from a year ago.

Data also showed China processed a record amount of crude oil on a daily basis in November as fuel consumption in the world’s second-largest economy recovered.

“Crude may see occasional pullbacks, but I don’t see a major downward correction,” said Vandana Hari, founder of energy consultancy Vanda Insights in Singapore. “I expect the continued rollout of vaccines across the world to remain a major supportive factor over the coming weeks and months.”