OPEC axes demand growth forecast

Lucas Ajanaku

THE Organisation of the Petroleum Exporting Countries (OPEC) has said it expects global oil demand growth to fall by 9.1 million barrels per day (bpd), extending the fall by 100,000bpd from its July forecast due mainly to lower economic activity levels in developing economies.

Next year’s demand, however, is expected to rise by 7 million bpd, OPEC said in its August report, unchanged from its July forecast.

Nigeria is a member of OPEC, with a maximum crude oil production capacity of 2.5 million bpd. It is Africa’s largest producer of oil and the sixth largest oil producing country.

Last May, its production of crude oil was 1,436 million bpd. Though production of crude oil fluctuated substantially in recent months, it tended to decrease through June 2019 – May 2020 period.

On the supply side, OPEC revised up its forecast for 2020 non-OPEC liquids production growth by 235,000 barrels a day due to a better-than-expected recovery in the second half, leaving output on track for a 3.03 million barrel a day decline year over year.

The U.S. Energy Information Administration (EIA) has raised its 2020 average spot price forecasts for both Brent and West Texas Intermediate (WTI) oil.

According to its latest short-term energy outlook (STEO), the EIA sees Brent spot prices averaging $41.42 per barrel and WTI spot prices averaging $38.50 per barrel this year. In its previous STEO, the EIA forecasted that Brent spot prices would average $40.50 per barrel and WTI spot prices would average $37.55 per barrel this year.

Looking further ahead, the EIA predicts that Brent spot prices will average $49.53 per barrel in 2021, which is a slight reduction on its previous 2021 projection of $49.70 per barrel. WTI spot prices are expected to average $45.53 per barrel next year, which also marks a slight decrease on the EIA’s previous prediction of $45.70 per barrel.

Read Also: OPEC cut: Oil revenue to drop by N140b

In its latest STEO, the EIA said it expects high inventory levels and surplus crude oil production capacity will limit upward price pressures in the coming months. The organisation added, however, that as inventories decline into 2021, upward price pressures will increase.

The EIA estimates that global liquid fuels inventories rose at a rate of 6.4 million barrels per day (MMbpd) in the first half of this year and expects they will decline at a rate of 4.2MMbpd in the second half of 2020, then by 0.8MMbpd in 2021.

The organisation noted that its latest STEO “remains subject to heightened levels of uncertainty because mitigation and reopening efforts related to the 2019 novel coronavirus disease (COVID-19) continue to evolve”.

As of August 11, there have been 19.9 million confirmed cases of COVID-19, with 732,499 deaths, according to the World Health Organisation (WHO). The U.S. has seen 4.9 million confirmed cases and 161,547 deaths, WHO data shows.

The EIA is the statistical and analytical agency within the U.S. Department of Energy. It collects, analyses, and disseminates independent and impartial energy information to promote sound policymaking, efficient markets and public understanding of energy and its interaction with the economy and the environment, its website states.