Organizationof thePetroleumExportingCountries 14 July 2020 Feature article: The outlook for the oil market in 2021 Oil market highlights Feature article Crude oil price movements Commodity markets World economy World oil demand World oil supply Product markets and refinery operations Tanker market Crude and refined products trade Commercial stock movements Balance of supply and demand i iii 1 7 10 25 35 51 57 60 65 70 67 OPEC bulletin 6–7/20 The outlook for the oil market in 2021 The outbreak of COVID-19 pandemic had an unprece- dented and devastating impact on the global economy and oil market fundamentals in 2020. While the market still finds itself in the midst of the crisis, gradual stabi- lization is expected to begin in 2H20, leading to a cau- tious forecast of renewed growth in the year to come. GDP growth in 2021 is forecast at 4.7 per cent, fol- lowing a contraction of 3.7 per cent seen this year. This assumes that COVID-19 is contained, especially inmajor economies, allowing for recovery in private household consumption and investment, supported by the mas- sive stimulus measures undertaken to combat the pan- demic. The 2021 forecast assumes no further downside risks materialize, particularly from trade-related issues. Growth risks include high debt levels, which could pose serious challenges for anticipated growth, not only due to general limitations in fiscal space, but also a rise in debt-services. Indeed, the magnitude of the recovery in the travel and hospitality sector, along with general leisure services and transportation will be significant to economic recovery in 2021. Global oil demand in 2021 is projected to recover strongly from the downturn seen in 2020, registering historical high growth of 7.0 million barrels/day al- though remaining far below the pre-COVID-19 level. Encouraging improvements in economic momentumare assumed to be the driving factors for increasing demand in 2021. In regional terms, the OECD is estimated to contribute around 3.5m b/d to growth, driven by posi- tive developments in OECD Americas. In the non-OECD, growth in petroleum product demand is also estimated at 3.5m b/d with Other Asia and China contributing a combined increase of more than 2.4mb/d. Gasoline and diesel are anticipated to record the highest y-o-y gains as both products are foreseen rising by more than 3.8m b/d. Jet fuel is expected to only partially recover, grow- ing by 800,000 b/d, as international travel will remain under pressure for the whole of 2021; lower travel and commuting activities will affect transportation fuel de- mand in general. Non-OPEC oil supply is forecast to growby 900,000 b/d in 2021, following a deep con- traction in the current year. This is mainly driven by an expected recovery in demand and a like- ly improvement in oil prices to levels that would lead to increased activities by US producers. US production in 2021 will see only a minor growth of 240,000 b/d, compared to the growth of 2.3m b/d seen in 2018 and the 1.7mb/d seen in 2019. US tight crude is expect- ed to grow by 240,000 b/d, mainly from the Permian Basin, offset by declines in onshore conventional crude. In North America, Canadian pro- duction is expected to recover, although pipeline con- straints are likely to persist. Oil production in coun- tries such as Norway, Brazil, and Australia is expected to increase through the ramping up of existing projects and new field start-ups. In contrast, natural decline in Egypt, Mexico, Thailand, Colombia and Kazakhstan is expected to offset some of this growth. Investment in Exploration and Production (E&P) in non-OPEC countries is expected at around $323 bil- lion in 2021, with US shale at around $63bn, down by $100bn from the peak levels seen in 2014. Overall, the outlook for 2021 remains dependent on the considerable uncertainties in 2021, both to the upside and the downside. At the same time, the histor- ic cooperation between OPEC Member Countries and non-OPEC countries participating in the ‘Declaration of Cooperation’ (DoC), together with the supportive actions of many of the G20 producers, have helped the global oil market, and hence the world economy, to overcome recent unprecedented challenges. The historic decisions taken amid a vast range of uncertainty have provided a substantial and highly effective contribution, paving the road for the global economic and energy markets recovery in 2021. July 2020