What Awaits the Future of Oil Demand?

What Awaits the Future of Oil Demand? What awaits the future of oil demand? Leading oil companies revised their oil demand forecasts. The International Energy Agency (IEA) and OPEC reassessed their oil demand forecast for the remainder of 2020 and 2021. The two organizations that shrunk their oil demand forecasts, cited quarantines in the US and Europe and the ongoing coronavirus cases. However, the oil market acted against this excuse. In fact, on the first day of the approval of the coronavirus vaccine in the USA, oil prices soared and Brent oil rose to $ 51 on Wednesday, while West Texas type (WTI) crude oil saw $ 48. [caption id="attachment_38179" align="aligncenter" width="657"] Kaynak: Investing.com[/caption] OPEC's downsizing of its oil demand forecast was also observed in the organization's December 2020 Monthly Petroleum Market Report. The agency now predicts that oil demand in 2021 will be 350,000 barrels lower than the previous forecast at 5.9 million barrels per day. This situation seems to put OPEC + in a difficult position for the January 4, 2021 ministerial meeting. OPEC's lowering of the demand forecast could put a consensus on political proposals. OPEC's oil market reports are prepared by OPEC's technical and professional unit, and their results are assumed to be independent of the political and diplomatic desires of the ministers making decisions regarding oil production. However, political concerns are thought to seep into technical areas, as OPEC members fund the professionals who issued these reports. It is stated that it is important that OPEC's low demand projections come right after OPEC +'s decision to increase production by 500,000 barrels per day as of January 2021. In other words, the idea that the ministers may have chosen the wrong policy resonates with the market. So much so that OPEC leadership used this new forecast report as a signal that OPEC + may not increase production in February and beyond, despite the decision to increase production in January. "... I think we need to be cautious, despite the positive signs and significant progress in oil prices, at best, we will be able to reach 2 million barrels a day like April. However, this is not a goal in itself ... " said Algerian Energy Minister Abdelmajid Attar, the current head of OPEC. It is said that Saudi Arabia, which does not want to increase its oil production in the first quarter of 2021, is likely to use this report at the January 4th meeting. It is almost certain that Saudi Arabia will oppose an increase in production of 500,000 barrels per day in February. It appears from the signals coming from the OPEC leadership that they want to support the reduction of the surplus in oil stocks. If, however, end-of-year sales are not seen and prices remain stable for the remainder of the year, then Russia and the UAE could gain a strong argument in favor of another 500,000 barrels production increase. If this happens, they may argue that the strong demand from China and India compensates for weaknesses in Europe and the USA. It has been said that Russia and the UAE could argue that the market should take advantage of this vitality, even if the oil-producing countries diverge from their demand expectations. Since the market prices are not shaped according to expectations now, January 4th seems to be the day of discussion between those who want to increase production (Russia, UAE) and those who want to produce less (Saudi Arabia).   Source: Investing.com