OPEC sees oil demand soaring in 2021 but still below 2019

An Indian laborer pulls a cart laden with empty oil drums. OPEC and its allies led by Russia have cut output by 10 million bpd since May. (AFP)
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Updated 15 July 2020

OPEC sees oil demand soaring in 2021 but still below 2019

  • Forecast highlights massive stimulus measures to counter global pandemic

LONDON: Global oil demand will soar by a record 7 million barrels per day (bpd) in 2021 as the global economy recovers from the coronavirus crisis, but will remain below 2019 levels, OPEC said in its monthly report.
It was the first report in which OPEC assessed oil markets next year. It said the forecast assumed no further downside risks materialized in 2021 such as US-China trade tensions, high debt levels or a second wave of coronavirus infections.

“This assumes that COVID-19 is contained, especially in major economies, allowing for recovery in private household consumption and investment, supported by the massive stimulus measures undertaken to combat the pandemic,” OPEC said.

Oil prices collapsed this year after global demand fell by a third when governments imposed lockdowns to stop the spread of the virus.

OPEC said in 2020 oil demand would drop by 8.95 million bpd, slightly less than in last month’s report.

In 2021, it expects efficiency gains and remote working to cap demand growth, keeping demand below record 2019 levels.

OPEC expects to cover the lion’s share of the massive projected demand spike in 2021 with demand for its crude rising by 6 million bpd to reach 29.8 million bpd.

From May 2020, OPEC and allies led by Russia have been cutting output by nearly 10 million bpd, or a 10th of global demand, to help prop up oil prices.

Output in countries such as the US, Norway and Canada has also fallen, although they are not part of the OPEC+ agreement on output cuts.

OPEC said it expected non-OPEC oil supply in 2020 to fall by 3.26 million bpd and rise by just 0.92 million bpd in 2021.

OPEC said it saw no growth of output from the former Soviet Union in 2021 even though Russia, Kazakhstan and Azerbaijan have been curtailing output in tandem with OPEC.

“I think OPEC is betting that some of the wells that were shut in don’t come back due to reservoir damage in non-OPEC countries. But OPEC isn’t immune to declines either,” said Amrita Sen, co-founder of the think tank Energy Aspects.

She said that OPEC’s demand recovery predictions could prove optimistic. Energy Aspects see demand bouncing back by about 5 million bpd next year.

OPEC said it expected US output in 2021 to grow by just 0.24 million bpd after falling by 1.37 million bpd in 2020 and a rise of 1.7 million in 2019.

OPEC said it had cut supply in June by a further 1.89 million bpd to 22.27 million bpd, based on secondary sources the group uses to monitor its output. That amounts to more than 110 percent compliance with the pledges, according to a Reuters calculation, up from May’s estimate of 84 percent.

OPEC estimated demand for its crude this year at 23.8 million bpd, up 200,000 bpd from last month and over 1.5 million bpd more than it pumped in June, suggesting maintaining current output would lead to a 2020 supply deficit.

Despite the cuts, oil stocks in industrialized countries continued to rise in May by 29.9 million barrels to reach 3.167 billion, about 210 million barrels above a five-year average.


Economic meltdown threatens Europe’s war on plastic waste

Plastic recycling at the Extruplas plant in Portugal. Europe produces 26 million tons of plastic waste each year. (Reuters)
Updated 08 August 2020

Economic meltdown threatens Europe’s war on plastic waste

  • Lower oil prices mean lower virgin plastic prices — and that spells trouble for the recycling industry

OUREM, Portugal: Giving a new life to plastic trash gets Carlos Bento out of bed every morning. But the coronavirus pandemic has seen revenues drop up to 40 percent at Micronipol, the large recycling facility he runs in central Portugal, and it faces an uncertain future.

Micronipol produces recycled polyethylene, the base for plastic bags and bottles. The product is piling up at its warehouses as clients, facing their own economic struggles, shelve their recycling goals. They are opting for cheaper alternatives: non-recycled plastics made from hydrocarbons.
As lockdowns were put in place worldwide, a drop in demand for oil pushed prices to historic lows, making virgin plastics — already becoming cheaper than the recycled equivalent — even more affordable.
“If we are no longer competitive and if we lose cash we have two options: Either someone has to subsidise us so we can keep working or we have to shut down,” said Bento, as he stood near a pile of colorful recycled plastic bales.
Lower virgin plastic prices could spell disaster for the future of European recyclers like Micronipol.
In Europe, virgin polyethylene terephthalate (PET) was over 7 percent, or €60 ($71) per ton, cheaper than the recycled equivalent last month, data from S&P Global Platts showed.
Industry group Plastic Recyclers Europe said firms in most EU member states have signalled their recycling facilities have reduced their operations or closed their lines for at least a few months.
“Without well-functioning and profitable plastics recycling there is no alternative, no environmentally sound option for plastic waste management,” said Antonino Furfari, the group’s managing director. “This waste will be incinerated or dumped.”
Piotr Barczak, senior policy officer for waste at the European Environment Bureau, called for a tax on all virgin plastics to eliminate the price gap.
The impact of the pandemic on recyclers is especially concerning at a time when consumption of plastics is expected to double to 600 million tons per year in the coming two decades, according to a report by Zero Waste Europe NGO. And as countries struggle to cope with the economic impact of the health crisis, fears abound that environmental policies are being left behind.

HIGHLIGHTS

● Virgin plastic cheaper than recycled alternative.
● European plastic recyclers struggling to stay afloat.
● Taxing virgin plastic could help industry survive.

EU Environment Commissioner Virginijus Sinkevicius told Reuters in a written interview that while the Commission had received relatively few requests for extensions or exemptions from EU environmental rules due to the pandemic, the crisis had a “significant impact” on countries’ administrative capacities.
The EU is to ban a range of single-use plastic items by 2021, a huge ambition which could now be under threat as more and more consumers and restaurants become more dependent on disposable plastic products due to contagion fears.
Portugal’s Environment Secretary of State Ines dos Santos Costa said her government’s ambition to cut disposable plastic products “still stands,” but the pandemic has transformed models of production and consumption worldwide.
Not far from Portugal’s capital Lisbon, recycling sorting facility Amarsul has raised concerns about the vast amounts of plastic gloves and masks it has been receiving.
“If the habit of using disposables continues, we may take a step back we will have to fix later,” said CEO Sandra Silva, adding that a recycling-based economic model “cannot stop because there is a pandemic.”
Europe generates 26 million tons of plastic waste annually, but less than 30 percent of that is collected for recycling. Experts say existing targets to improve plastic recycling could be in danger of not being met.
Sandra Castro, head of Extruplas firm that makes wooden-like outdoor furniture from plastics it recycles, is hoping the current situation is no more than a temporary bump in the road.
“We need the industry to be able to provide a solution to the waste we produce,” Castro said.
But for Sirpa Pietikainen, Finnish member of the European Parliament, the only way to tackle plastic pollution, which some scientists say is fueling climate change through greenhouse gas emissions, is to produce less waste.
“If you thought the coronavirus crisis was bad for the economy, climate change will be 100 times worse — and then you will not only talk about losing GDP points, you will talk about access to medication, water and food,” she said.
“We really need to act now.”