A rebound in the world’s appetite for oil has been delayed by the sluggish rollout of coronavirus vaccines across Europe, according to the International Energy Agency.
The global oil market watchdog said a recovery in oil demand would be “fragile” in the first half as the year, before a rebound in the second half as economies begin to return to normal.
Oil demand is on track to decrease by 1m barrels a day in the first quarter compared with the end of 2020, when demand was already far lower because of the economic fallout of the pandemic.
IEA, which advises major world economies, said: “Renewed lockdowns, stringent mobility restrictions and a rather slow vaccine rollout in Europe have delayed the anticipated [oil demand] rebound.”
But the second half of the year will look brighter for oil producers, according to the Paris-base agency’s latest monthly oil report. It predicted oil demand would climb this year by 5.4m barrels a day to daily average of 96.4m barrels. This is still below the pre-pandemic peak of almost 100m barrels a day.
Higher oil prices are also highly likely in the second half of the year as the Opec continues to keep a tight lid on production, according to the IEA report.
The cartel of 23 major producing nations has agreed to stick to a supply pact struck in the depths of the oil market crash last year while its de facto leader, Saudi Arabia, cuts its production by a further 1m barrels a day.
The scheme has helped oil prices climb to more than $60 (£43) a barrel, up from less than $20 a barrel when oil demand hit historical lows. This is despite faltering demand.
The combination of higher oil prices and Opec production limits will mean a brighter outlook for non-members and its allies, the IEA said, including Canadian and US shale oil producers.