COVID-19 vaccine won’t rescue global oil demand until next year

A coronavirus vaccine is “unlikely to ride to the rescue” of the global oil market until sometime next year, the International Energy Agency says.

The intergovernmental body reduced its forecast for worldwide oil demand Thursday, saying a surge in COVID-19 infections in the US and Europe and the attendant lockdowns will put renewed pressure on the industry.

While Pfizer’s strides toward producing an effective vaccine have driven up oil prices this week, the IEA says a shot likely won’t boost demand “until well into next year.” The agency expects oil demand to drop by 8.8 million barrels a day in 2020, up from the 8.4 million-barrel decrease projected in October.

“It is far too early to know how and when vaccines will allow normal life to resume,” the IEA said in its monthly oil market report. “For now, our forecasts do not anticipate a significant impact in the first half of 2021.”

The coronavirus pandemic caused turmoil in the oil market earlier this year by bringing travel and other economic activity to a near-standstill at a time when there was an oversupply of oil thanks to a price war between Russia and Saudi Arabia.

The US and other big economies in the Organization for Economic Cooperation and Development have drawn down their massive oil stocks in recent months, but the amount they had in storage in September was only 4 percent below its peak in May, when US crude traded at less than $30 a barrel, the IEA said.

The Organization of the Petroleum Exporting Countries and its allies are also planning to increase oil output by 2 million barrels a day starting in January, which wouldn’t help the imbalance between demand and supply, according to the agency.

“Unless the fundamentals change, the task of re-balancing the market will make slow progress,” the IEA said.

With Post wires

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