The world’s appetite for oil will be lower than expected this year as the ongoing spread of the coronavirus Delta variant continues to drag on global economies, according to the International Energy Agency (IEA).
The global watchdog has slashed its oil demand forecasts for the rest of this year and predicted that crude supplies may outstrip demand next year to leave a glut of unwanted oil in the market.
It said its forecasts for oil consumption in the second half of the year had been “appreciably downgraded” and would fall below its early forecasts by more than 500,000 barrels a day.
“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 influential monthly oil 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 prediction comes a month after the agency urged the world’s biggest oil producers within the Opec cartel and its allies to increase production to avoid a shortfall which could cause market prices to spike and raise costs for major economies as they emerge from the pandemic.
Global oil prices have climbed from just over $50 a barrel at the beginning of the year to pre-pandemic highs of $78 last month, buoyed by hopes within the oil market that the roll out of Covid-19 vaccines would lead to a rebound in economic activity and demand for energy.
Oil prices have retreated by around 6% in recent weeks to $71 a barrel on Thursday as fears grow that an economic rebound could be delayed because of ongoing restrictions intended to curb the spread of the Delta variant.
