The International Energy Agency trimmed its oil demand estimate for 2020 on the resurgence of the coronavirus in the West and said it does not expect vaccines “to ride to the rescue” of the market for “some time”, S&P Global Platts said in a report on Thursday.
The IEA in its latest monthly oil market report published Nov. 12 said the task of re-balancing the oil market will make “slow progress” as fundamentals remain weak due to the poor outlook for demand and rising production in some countries.
Oil demand will plunge by 8.8 million b/d in 2020, a downward revision of 400,000 b/d from its previous forecast, according to the report. However, demand will grow by 5.8 million b/d in 2021 to average 97.1 million b/d, which includes a small upward revision from last month.
Oil prices have surged this week to five-month highs after Pfizer and BioNTech said that their COVID-19 vaccine had proven to be more than 90% effective in a phase 3 trial.
But the IEA said it does not expect a major enhancement in oil demand from vaccines until at least the second half of the 2021.
The IEA assumes that vaccines will be widely available from mid-2021, from which point mobility and oil demand will “return progressively to normal conditions.”
“It is far too early to know how and when vaccines will allow normal life to resume. For now, our forecasts do not anticipate a significant impact in the first half of 2021,” IEA said in the report.
The Paris-based agency said the vaccine announced this week by Pfizer and BioNTech is unlikely to ride to the rescue of the global oil market for some time. But it said the vaccine would contribute to a demand recovery next year, with a boost expected in the second half of 2021.
“Our outlook continues to assume that vaccines will be widely available by the middle of 2021. Under this assumption, economic activity and thus oil demand should receive a boost in H2 2021,” the IEA said.
The second wave of coronavirus infections in Europe has led to more restrictions on mobility, prompting the IEA to revise down its global demand outlook for this year.
The report said this will “temporarily halt the demand recovery seen in Europe,” but it does not think these latest measures will be as significant as in the first wave over March-May.
Demand in Europe will fall by 2.1 million b/d year on year in November, compared with the 4.1 million b/d fall registered in April during the first lockdown, it said.
The divergence of demand between Europe, the Americas and the rest of the world is likely to persist.
“We continue to assume in our outlook that countries will have to fight sporadic resurgences of the virus by implementing social distancing measures,” it added. “The accelerating development and eventual deployment of vaccines could reduce uncertainty and support investment and growth next year.”
The demand bright spots remain centered on Asia, notably China and India.