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OPEC cuts world oil demand outlook for 2021; India's economic outlook clouded by high level uncertainty, potential power crises

For India, OPEC said that despite the uptick in the vaccination rate, the country's "recovery was still challenged by the lingering effects of the recent COVID-19 wave."

November 12, 2021 1:41 IST | India Infoline News Service
The Organization of the Petroleum Exporting Countries  (OPEC) has lowered the world oil demand outlook for 2021 by around 0.16 mb/d, compared to last month’s assessment, to stand at 5.7 mb/d. Giving rationale to the downgrade, OPEC cited slower than anticipated demand from China and India in 3Q21" as the reason.

OPEC estimates global oil demand to reach 96.4 mb/d in 2021.

For 2022, OPEC said that "growth in global oil demand remains unchanged compared to the previous month’s assessment, to stand at 4.2 mb/d," adding, "world total demand in 2022 is now estimated to reach 100.6 mb/d, around 0.5 mb/d above 2019 levels."

OPEC said "marginal upward revisions in OECD Europe, due better economic views in some European countries, were offset by softer growth in industrial fuel demand, in OECD America and Latin America."

For India, OPEC said that despite the uptick in the vaccination rate, the country's  "recovery was still challenged by the lingering effects of the recent COVID-19 wave."

In India, crude imports hit a five-month high, averaging 4.3 mb/d in September, as refiners boosted runs amid a recovery in economic activity. Notably, Indian oil demand grew in September by around 0.2 mb/d y-o-y, compared to an increase of around 0.4 mb/d y-o-y in August and a decline of 0.1 mb/d y-o-y in September 2020, as per OPEC data.

OPEC outlined that the increased vaccination rate is mainly for the first dose, which might imply that 70% of the population could be fully vaccinated in 1Q22. For the time being, household spending was kept cautious. Indeed, auto sales contracted for the second month in a raw amid the global chip shortage. In September, cars, two-wheel vehicles and tractor sales shrank 52%, 27% and 0.4% m-o-m, seasonally adjusted, respectively.

In the near-term expectations, for India, OPEC stated that despite the gradual lifting of a new set of state-level restrictions, India’s economic outlook remains cautious, as in-person economic activities might remain restrained considering the slow pace of vaccination with only the first dose having been administered. Moreover, concerns may increase regarding the risk of a COVID-19 resurgence going into the winter season. In the meantime, India may also face a power crisis as the reduced supply of coal could trigger a power shortage; 70% of India’s electricity is powered by coal.

Meanwhile, OPEC said "India’s 2021 growth forecast remains at 9% and at 6.8% for 2022."

OPEC said that "despite optimism over a slowdown in infections and a pickup in the vaccination rate, India’s economic outlook is still clouded by a high level of uncertainty, and a potential power crisis may add more downward pressure. India’s 2021 growth forecast is thus pegged at 9.0% and 6.8% in 2022, unchanged from the last MOMR."

In 2022, similar to last month’s expectations, 1Q22 Indian oil demand estimates are at around 0.5 mb/d with 2022 annualized growth expected at around 0.4 mb/d y-o-y. Total volumes are expected to exceed prepandemic levels on an annualized basis by more than 0.3 mb/d. Regarding products, gasoline is anticipated to be the strongest product in 2022, supported by an acceleration in mobility, an uptick in vehicle sales and overall steady economic growth. Diesel is assumed to be supported by healthy growth in the industrial, construction and agricultural sectors during 2022, OPEC said.

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