IEA, OPEC Slash Oil Demand Outlook Amid “Headwinds” From Spreading Delta Variant
The International Energy Agency and Goldman Sachs are both warning that global oil demand is facing headwinds due to the spread of the COVID-19 Delta variant: “Growth for the second half of 2021 has been downgraded more sharply, as new COVID-19 restrictions imposed in several major oil-consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the IEA said in its monthly report.
“We now estimate that demand fell in July as the rapid spread of the COVID-19 Delta variant undermined deliveries in China, Indonesia, and other parts of Asia,” the IEA said.
Since July, NYMEX West Texas Intermediate (WTI) futures have fallen at least 10% as the Delta variant spreads worldwide. Traders are worried renewed lockdowns and or stricter social distancing measures in China, Europe, and the US may continue to weigh on oil demand and result in lower prices.
The “recent rally has lost steam on concerns that a surge in Covid-19 cases from the Delta variant could derail the recovery just as more barrels hit the market,” the IEA said.
The agency said global oil demand “abruptly reversed course” last month, after surging by 3.8 million barrels a day in June, adding that it lowered consumption estimates for the second half of this year by 550,000 barrels a day.
However, the IEA projects in the last quarter of this year, the global economic recovery should regain steam as world fuel should reach an average of 98.9 million barrels a day.
Similar to IEA’s forecast is a report from Goldman Sachs’ Damien Courvalin, who told clients that “transient demand headwinds” have developed and there is “growing evidence of structural supply tailwinds.”
Courvalin already lowered his emerging market demand expectations last month due to the Delta spread but at the time “omitted” China from the downgrade.
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