The report’s optimism comes even as it warns of “significant uncertainties,” mainly around the pandemic, and as concern about India weighs on oil prices. Crude fell after the report was released but is still up 30% this year at near $68 a barrel.
“India is currently facing severe COVID-19-related challenges and will therefore face a negative impact on its recovery in the second quarter, but it is expected to continue improving its momentum again in the second half of 2021,” OPEC said in its monthly report.
India’s seven-day average of new COVID cases hit a record high on Tuesday. Oil refiners in the country – the third-largest consumer – are reducing crude processing rates.
In the report, OPEC cut its oil demand forecast for the second quarter by 300,000 bpd, and raised its estimate for the third quarter by 150,000 bpd and by 290,000 bpd for the last three months of 2021.
OPEC now sees 2021 world economic growth at 5.5%, up from 5.4% last month, assuming the impact of the pandemic will have been “largely contained” by the beginning of the second half.
“The recovery is very much leaning towards the second half,” OPEC said.
LOWER NON-OPEC SUPPLY
OPEC and its allies, known as OPEC+, agreed in April to gradually ease oil output cuts from May, after the new U.S. administration called on Saudi Arabia to keep energy affordable for consumers.
The report also showed slightly higher OPEC oil output already as Iran, exempt from making voluntary cuts due to U.S. sanctions, pumped more in April, driving a 30,000 bpd rise in the group’s output to 25.08 million bpd.
OPEC+ cut supply by a record 9.7 million bpd last year to support the market as demand collapsed. Most of those curbs remain in place even after the April decision.
In the report, OPEC also raised its estimate of how much oil it needs to pump this year, citing the impact on U.S. output of the Texas freeze. Non-OPEC supply is now expected to rise by 700,000 bpd, down from 930,000 bpd last month.
As a result, OPEC raised its estimate of global demand for its crude to 27.7 million bpd this year, up 200,000 bpd from last month and allowing for higher average OPEC production in 2021.