The first half of the year 2021 could witness quite a number of downside risks for the international oil markets not withstanding hopeful signs.
The Secretary-General of the Organisation of Petroleum Exporting Countries, OPEC, Mohammad Barkindo, said this over the weekend at a meeting of experts of OPEC and Allies, a group known as OPEC+.
“Amid the hopeful signs, the outlook for the first half of 2021 is very mixed and there are still many downside risks to juggle, curbs on social and economic activity remain in place in a number of countries, and there is concern about the emergence of a pernicious new strain of the corona virus,’’ Barkindo said.
The OPEC Secretary-General believes that the global economy could strongly rebound in the second half of 2021 but sectors such as travel, tourism, leisure, and hospitality may take years to return to pre-virus levels.
Secretary-General OPEC, Mohammad Barkindo
Declining oil demand in 2020, following the global lockdown, forced OPEC+ to cut production by a record amount with first output cut by 9.7 million bpd, then followed by 7.7 million and 7.2 million from January 2021. According to Barkindo, OPEC now expects global oil demand, led by developing countries, by 5.9 million bpd from 2020 to 95.9 million bpd in 2021.
In December, OPEC+ decided to increase production by 0.5 million barrels per day (bpd) with effect from January 2021, as part of the two million bpd planned gradual rise in the year, however, some members are not in support of a further boost owing to the ravaging coronavirus contagions. “Given fundamentals are weakening, it would be prudent for OPEC+ to hold output steady and there is a preference among some of the biggest producers to hold production flat,’’ Amrita Sen, co-founder of Energy Aspects think-tank, said.
During previous meetings, leading OPEC producer, Saudi Arabia, had recommended a more cautious approach while some other OPEC members of the United Arab Emirates and a non-OPEC Russia have opted for a faster increase.
OPEC’s latest December forecast has been lower than the previous estimate of a 6.25 million bpd rise in 2021 owing to the lasting impact of the coronavirus pandemic.