Oil prices are rallying aggressively on the back of Saudi Arabia’s surprise cut and optimism over the rollout of vaccines across the world. News of a new strain of COVID19, however, has hurt the prospect of a demand recovery in Europe. The big question now for analysts is what does 2021 hold for oil markets?
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The International Energy Agency (IEA) says that oil demand recovery will be slower in 2021 than previously thought. Reducing its projections by 170,000 barrels per day (bpd), the Paris based agency estimates that oil demand will be 5.7 mbpd in 2021. With reports of new lockdowns across Europe, demand in the transport sector will likely take a hit. Further, with recent flight bans from the UK, jet fuel demand will continue to be under pressure. In fact, according to the IEA, 80 percent of the decline in fuel consumption in 2021 from 2019 levels will be attributed to weak consumption of jet fuel. Analysis by S&P Global Platts suggests that demand will be 2.4 mbpd lower than 2019 levels, coming in at around 5.3 mbpd.