IEA warns: The slow impact of vaccines on oil demand will continue until the end of 2021
On Wednesday (16th), crude oil futures prices closed slightly higher, as the market expects Washington to advance another round of economic relief plans, and EIA data shows that US crude oil inventories fell last week.


The International Energy Agency (IEA) lowered its annual oil demand forecast on Tuesday, lowering its production forecast for the fourth quarter of this year by 200,000 barrels per day. The annual oil demand will reach 91.2 million barrels per day, a decrease of 8.8 million barrels per day from 2019. day. The IEA stated that in the case of tight demand, the problem of oversupply will continue until the end of 2021, and warned that the vaccination program launched this month will not immediately reverse the destruction of oil demand.
On Wednesday (16th), crude oil futures prices closed slightly higher, as the market expects Washington to advance another round of economic relief plans, and EIA data shows that US crude oil inventories fell last week.
WTI crude oil futures for January delivery rose 20 cents, or nearly 0.4%, to settle at 47.82 US dollars per barrel; Brent crude oil futures for February delivery rose 32 cents, or 0.6%, to settle at 51.08 US dollars per barrel.
The continued promotion of the new crown vaccine in the United States has helped to rebuild economic growth and provided crude oil support, but the expected recent decline in demand has curtailed the rise in oil prices.
FXTM market analysis manager Lukman Otunuga believes that the news is positive for oil prices, and the price of WTI crude oil is expected to increase to US$50 per barrel. "As countries around the world approve the new crown vaccine, the market expects that demand recovery will accelerate. This continues to provide support for crude oil. The world's largest economy has also joined the list of countries that have approved the emergency use of the vaccine, and the outlook for crude oil will continue to shine in the short term."
Regarding the market’s optimism, IEA remains cautious. The IEA said that to some extent, the vaccination plan explained the reasons for the rise in oil prices, but it will still take several months to achieve mass vaccination and restart the economy before we can see the impact of vaccines on oil demand.
With the end of the year holiday approaching, the IEA warned that the risk of a warming epidemic may still strike again, and even trigger more blockade measures. Oil demand is expected to remain weak in the short term.
In addition, IEA predicts that, driven by gasoline and diesel consumption, average crude oil consumption will reach 96.9 million barrels per day in 2021, returning to the level of 99% before the outbreak.
OPEC+ reached an agreement earlier this month, agreeing to gradually reduce the range of production cuts from January next year, and the monthly output will increase by 500,000 barrels per day to offset the decline in demand. The IEA agrees with this, saying that OPEC+ has shown flexibility in the arrangement of modifying the production reduction quota.
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