IEA Cuts Oil-Demand Outlook as Vaccines Won’t Rescue Market

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While Pfizer's strides toward producing an effective vaccine have driven up oil prices this week, the IEA says a shot likely won't boost demand "until well into next year".

Brent (BZ=F) was up 0.32% and sitting at $43.94 on Thursday at around 12:30pm in London.

Big oil companies have more than just lower demand to deal with: the U.S. president-elect's green energy plan is also a threat to the dusky nectar.

The Paris-based IEA, which advises most major economies, reduced oil-demand projections for this quarter sharply, by 1.2 million barrels a day. But the IEA has been quick to poop on that particular party, saying it doesn't expect demand to rise in any significant way till late 2021.

The IEA, in its monthly report, said that "with a Covid-19 vaccine unlikely to ride to the rescue of the global oil market for some time, the combination of weaker demand and rising oil supply provides a hard backdrop" to the meeting.

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It expected global oil demand to grow by 6.2 million b/d in 2021, cutting the number down by 0.3 million b/d compared to last month's assessment, due to COVID-19 restrictions "with the accompanying adverse impacts on transportation and industrial fuel demand through mid-2021". It also trimmed estimates for 2021, lowering its first-quarter projection by 700,000 barrels a day, though demand is still set to stage a rebound of 5.8 million barrels on average next year.

Data now available for the third quarter suggest that inventories fell by barely a third of the expected amount, declining by 800,000 barrels a day, the IEA said.

Global oil supply is on the increase and with such low demand, that will be a concern. "Unless the fundamentals change, the task of rebalancing the market will make slow progress".

The IEA estimates that it's up 200,000 barrels a day since last month and with production from Libya back in the mix and a resumption of supply in the U.S. post hurricane season, more than a million extra barrels could be expected on the market.

"With a Covid-19 vaccine unlikely to ride to the rescue of the global oil market for some time, the combination of weaker demand and rising oil supply provides a hard backdrop to the meeting of OPEC+ countries due to take place on December 1". OPEC is scheduled to ease the current production cuts for 2021, but the feeling is they will maintain the current cuts of 7.7 million barrels a day.

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