While 2020 began on relatively solid footing, the COVID-19 pandemic upended all expectations, especially for 1H2020.
Indeed, global growth recovered considerably in 3Q20, with the rebound mainly supported by exceptional fiscal and monetary stimulus, as well as the easing of lockdown measures by the end of 2Q20.
Additionally, savings mainly in OECD economies during the lockdown built a solid base for reviving consumption, as well as lifting global trade and investment.
More recently, rising infections and growing uncertainties have left the global economic recovery more fragile, with global GDP now forecast to show a decline of 4.2% in 2020.
Next year, global GDP is forecast to grow by 4.4%. This rebound will be mainly driven by emerging and developing economies, especially in Asia.
The actual growth trajectory will very much depend on uncertainties related to COVID-19 developments, policies of the incoming US administration and Brexit negotiations, as well as ongoing trade negotiations.
Recent news about the possibility of vaccination programs in most major economies provides upside to the current forecast, which assumes that a vaccination will gradually be globally available by 2H21. Earlier availability would allow a faster-than-anticipated move towards normalisation.
The COVID-19 pandemic and accompanying lockdown measures have had an unprecedented impact on world oil demand, with the latest data pointing to a historic contraction of 9.8 mb/d in 2020.
Oil demand in the OECD is estimated to fall by 5.5 mb/d in 2020, while non-OECD oil demand is anticipated to drop by 4.3 mb/d, despite a notable recovery in China in 3Q20, and more lately in India.
For 2021, global oil demand is estimated to rebound by 5.9 mb/d, with OECD increasing by 2.6 mb/d, led by OECD Americans contributing 1.6 mb/d. In the non-OECD, oil demand growth is projected to be around 3.3 mb/d, with growth focused in China and India.
The solid economic recovery coupled with the low baseline of 2020 will support oil demand growth next year.
Transportation and industrial sectors are projected to lead oil demand growth in 2021. However, uncertainties remain high, mainly surrounding the development of the COVID-19 pandemic and rollout of vaccines, as well as the structural impact of COVID-19 on consumer behaviours, predominantly in transportation sector.
On the supply side, non-OPEC growth in 2020 has been lower than initial expectations as the COVID-19 outbreak led to a drastic fall in demand and prices.
In an effort to address the unprecedented turmoil in the market, OPEC members and non-OPEC participating in the DoC removed some 9.5 mb/d of excess supply from the market, with an estimated 2.6 mb/d contributed by non-OPEC partners in the DoC.
The US and Canada contributed a further reduction of 3.6 mb/d through shut-in wells. As a result, non-OPEC supply is now expected to show a decline of 2.5 mb/d this year.
In 2021, non-OPEC supply is projected to see a mild recovery of 0.8 mb/d, y-o-y, on the back of a gradual increase in drilling and completion activities in North America, as well as an rise of 0.7 mb/d from non-OPEC producers in the DoC.
US tight crude output is expected to remain flat, although total liquids will grow by 0.3 mb/d. Canada, Norway, and Brazil are also expected to see growth in 2021, amid considerable uncertainties on the overall forecast, as the industry responds to conditions related to the pandemic.
Following the drastic impact of the COVID-19 pandemic on the global economy and world oil demand in 2020, OPEC and the Non-OPEC countries participating in the DoC acted swiftly and decisively earlier in the year to adjust oil production to avoid a severe oil market imbalance.
The recent OPEC and Non-OPEC Ministerial Meeting on 3 December reconfirmed the existing commitment under the DoC decision from 12 April 2020, then amended in June and September 2020, to gradually return 2 mb/d, given consideration to market conditions.
Beginning in January 2021, DoC participating countries decided to voluntarily adjust production by 0.5 mb/d from 7.7 mb/d to 7.2 mb/d. Furthermore, DoC participating counties agreed to hold monthly OPEC and Non-OPEC ministerial meetings starting January 2021 to assess market conditions and decide on further production adjustments for the following month, with further monthly adjustments being no more than 0.5 mb/d.