LONDON—It will be several months before coronavirus vaccinations start to boost global oil demand, with the recovery in some of the world’s wealthy countries “going backwards” this quarter, the International Energy Agency said Tuesday.
In its monthly oil-market report, the IEA cut its forecast recovery in demand for 2021 by 170,000 barrels a day to 5.7 million barrels a day. That included a reduction of 400,000 barrels a day to its forecast demand for the second quarter, when analysts had expected the expansion of vaccination programs around the world to begin lifting economic activity.
The agency also lowered its demand forecast for the final quarter of 2020. Demand has somewhat recovered in the second half of the year from its historic 16% drop in the second quarter, but that resurgence “is almost entirely due to China’s fast rebound from lockdown,” the IEA said. But the demand outlook in the wealthy countries that make up the Organization for Economic Cooperation and Development is bleak, according to the IEA.
With another wave of infections having prompted a return to lockdown measures in Europe, demand there in the final three months of the year is expected to be even weaker than it was in the third quarter, the agency said.
Expected pressure on the airline industry in 2021 was a major driver behind the IEA’s downgrades. Weaker demand for jet fuel and kerosene is projected to next year account for 80% of the shortfall of 3.1 million barrels a day in overall demand compared with 2019, meaning the world in 2021 would recover only two-thirds of the demand lost this year.
Oil prices climbed on Tuesday, hitting nine-month highs and rising with broader risk assets on hopes for a U.S. pandemic-relief package, according to
an analyst at broker Oanda. Global benchmark Brent crude added 0.9% to $50.76 a barrel. West Texas Intermediate futures, the U.S. benchmark, rose 1.3% to $47.62 a barrel.
Optimism over coronavirus vaccines in recent weeks has fueled sharp rallies across financial assets, particularly those that have been hammered by the restrictions put in place to counter rising infection rates.
The IEA’s softer expectations for the year ahead came the day after the Organization for the Petroleum Exporting Countries made a similar cut to its predictions.
The changes come at the end of a fickle year for energy markets, with U.S. crude prices having slid below zero for the first time ever in April, when unused oil inventories threatened to overwhelm the world’s ability to store them.
Still, the start of vaccination programs, the recovery of the Chinese economy and ongoing supply discipline within the OPEC+ alliance all represent reasons to be optimistic, the agency said.
The cartel and its allies including Russia agreed earlier this month to increase oil production on Jan. 1 by only one-quarter of the volume initially set. The group conceded that global demand wasn’t sufficient to introduce 2 million extra barrels of oil a day into the market, and despite output from Libya having exceeded a million barrels a day in November, the decision from OPEC+ has boosted sentiment, the IEA said.
Write to David Hodari at David.Hodari@dowjones.com
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Appeared in the December 16, 2020, print edition as ‘Energy Agency Cuts Global Oil-Demand Forecast.’