LONDON • The International Energy Agency (IEA) cut forecasts for global oil demand amid new lockdown measures and cautioned that the vaccine breakthrough will not quickly revive markets.
While crude prices rallied to a 10-week high above US$45 this week on news of Pfizer's progress, fuel use will not experience any "significant" boost from vaccines until the second half of next year, said the agency.
The Paris-based IEA, which advises most major economies, reduced oil demand projections for this quarter sharply - by 1.2 million barrels a day.
Futures fluctuated between gains and losses near US$41 a barrel following the forecast.
The faltering outlook for consumption, combined with rising supply in places such as Libya, puts pressure on the Organisation of Petroleum Exporting Countries (Opec) cartel and its allies as they prepare to meet in just under three weeks, said the IEA.
The Opec+ alliance, led by Saudi Arabia and Russia, had initially aimed to restore some of the supply they are keeping offline at the start of next year but is increasingly focused on delaying the move.
The IEA, in its monthly report, said that "with a Covid-19 vaccine unlikely to ride to the rescue of the global oil market for some time, the combination of weaker demand and rising oil supply provides a difficult backdrop" to the meeting.
It added: "Unless the fundamentals change, the task of rebalancing the market will make slow progress."
If Opec+ does proceed with its scheduled supply increase of almost two million barrels a day in January, the producers will fail to deplete global oil inventories during the first quarter, said the agency.
Bringing stockpiles, swollen by this year's demand collapse, back to normal levels has been one of the coalition's key goals.
Data now available for the third quarter suggests that inventories fell by barely a third of the expected amount, declining by 800,000 barrels a day, said the agency.
Global oil consumption is on track to slump by an unprecedented 8.8 million barrels a day this year, averaging 91.3 million a day, according to the IEA.
It also trimmed estimates for next year, lowering its first-quarter projection by 700,000 barrels a day, though demand is still set to stage a rebound of 5.8 million barrels on average next year.
Besides the challenge of deteriorating demand, Opec also has to reckon with a surprising rebound in supply.
World output could be one million barrels a day higher this month as the United States recovers from hurricane disruptions and Libya resumes exports, said the agency.
Libya, one of three Opec nations exempt from the agreement to restrain output, trebled production to 450,000 barrels a day last month as its political tumult abated, said the IEA.
It is now pumping more than one million barrels a day and could average just below this level this month, the agency predicted.
Oil has surged almost 12 per cent this week, with most of the gains coming after news of a Covid-19 vaccine breakthrough.
However, the global stock rally spurred by the news showed signs of stalling in Asia as investors assess a deteriorating coronavirus outlook in many large economies around the world.
CMC Markets chief market strategist Michael McCarthy said: "In the short term, we are looking for more gains for oil.
"The vaccine won't have any impact on demand until it can be deployed but the turnaround in market thinking means oil will be able to hold on to these levels."
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