OPEC revises down again 2021 crude demand forecast on transport, but petchems healthy

Jonathan Lopez


LONDON (ICIS)–Crude oil demand in 2021 is expected to rise by 5.90m bbl/day, down slightly from previous estimates, on the back of woeful transportation, but demand for petrochemicals is set to remain healthy, the producing cartel OPEC said on Monday.

Compared with its November forecast, OPEC’s 2021 crude demand estimate was lowered by 350,000 bbl/day, and is now forecast to rise to 96.89m bbl/day.

But that increase in 2021 would leave the crude oil market industry still reeling from the historic hit caused by the pandemic.

Crude oil demand stood close to 100m bbl/day in 2019, but the pandemic wiped out 10% of the market as transport and industry took a hit from lockdown measures implemented globally to contain the spread of the pandemic.

Demand for crude oil is expected to close 2020 at 89.99m bbl/day, a historic fall of 9.77m bbl/day compared with 2019.

OPEC said worse-than-expected economic indicators had prompted it to lower its 2021 crude oil demand estimate.

“This is due to the uncertainty surrounding the impact of Covid-19 and the labour market on the OECD [37 most industrialised nations] transportation fuel outlook for H1 2021,” said the producing cartel.

“Petrochemical feedstock and industrial fuels are forecast to gain momentum on the back of improving economic activities.”

However, most of the crude oil market’s woes will come from the transportation side in 2021, with healthy industrial activity set to prop up demand for the petrochemicals sector.

Even in regions like Europe, where the economy faces an uphill battle to recover pre-pandemic levels, demand for crude oil from petrochemicals is set to be healthy.

Globally, higher capacities in Asia and North America are also expected to demand more crude oil for the production of petrochemicals.

“Feedstocks are expected to gain momentum on the back of recent capacity additions in China and the US. All products are estimated to grow year on year following the steep impairment in 2020,” said OPEC.

“On the flip side, fuel efficiency gains, the continuation of oil displacement programmes and subsidy removals will limit oil demand growth.”

In Europe, where petrochemicals production is still heavily dependant on crude oil products, healthy demand for crude oil is expected to be led by liquefied petroleum gas (LPG) and to a lesser extent, naphtha.

As a sign of the downstream industries’ resilience, OPEC said European demand for LPG in September 2020 had been the second largest monthly year-on-year increase since August 2018.

“Petrochemical demand has been well supported by steady requirements for plastics in the healthcare sector and for packaging materials as online shopping expands due to the pandemic,” said OPEC.

“Expansion in industrial activities in September supported fuel oil and diesel, minimising the year-on-year decline.”

The gains coming from petrochemicals will take place globally, according to OPEC, with China’s sound recovery also making its mark.

The cartel said that petrochemical feedstock, especially LPG, would perform better in China than other fuels and would be a “key driver for China’s oil demand growth in 2021”.

According to OPEC, the hit to crude oil demand in the second quarter as lockdowns become generalised was compounded by weaker than expected growth in OECD countries during the third quarter, as transportation fuel did not pick up as expected.

The worse-than-expected figures for the OECD were offset in part by China’s booming demand, said OPEC, as well as improving demand from India as the pandemic there stabilised.

The producing cartel expects global GDP to fall by 4.2% in 2020, year on year, and to recover to growth of 4.4% in 2021 as faster-than-expected vaccinations are rolled out.

Among the major economies, OPEC said the 19-country eurozone is expected to take a hit of 7.3% in 2020, and pre-pandemic levels would not be reached at least until 2022 – growth in 2021 is expected at 3.7%.

OPEC is led by Saudi Arabia and composed of 13 members; the other 12 are Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, the UAE, and Venezuela.

Front page picture: Oil pumps in Sakhir, Bahrain
Source: Hasan Jamali/AP/Shutterstock 


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