Upon hearing this news, future markets reacted positively, signaling optimism among the oil industry as an effective cure has been seen as necessary to jumpstart the global economy.
Some, like the International Energy Agency, took a more cautious approach to the news. In its latest report, IEA argued that a vaccine for the novel coronavirus was “unlikely to ride to the rescue of the global oil market for some time.”
The report said, “the combination of weaker demand and rising oil supply provides a difficult backdrop to the meeting of OPEC+ countries.”
OPEC is scheduled to meet next on Nov. 30, with OPEC+, a group of OPEC and non-OPEC allies, expected to meet on Dec. 1.
Further complicating this meeting is the report’s forecast, which expects world oil demand to contract by 8.8 million barrels per day for the rest of the year. This recent prediction is a downward recalculation of 0.4 million barrels from the past month.
As coronavirus restrictions began to ease, especially in Q3, global oil demand started to see some improvement. However, signs of cases resurging, especially in Europe and the United States, have led some to believe that any recovery is at risk of being derailed.
In its latest report, OPEC said, “These downward revisions mainly take into account downward adjustments to the economic outlook in OECD economies due to COVID-19 containment measures, with the accompanying adverse impacts on transportation and industrial fuel demand through mid-2021.”
OPEC+ agreed to cut oil production by 10 million barrels per day in May as the coronavirus pandemic ravaged demand. By August, the group decided to scale back by only seven million barrels per day, with plans to continue tapering off into the following year.
Supply is expected to increase, despite declining demand, especially as OPEC begins to see reductions and Libya’s oil production normalizes after lifting its force-majeure blockade.
The IEA predicts that world oil demand will grow around five million barrels per day in 2021, an upward calculation from the previous month of 0.3 million barrels.