Delta Variant Slows Oil & Gas Demand
Things are not looking good for the oil and gas industry at the sudden wave of new infections brought about by the Delta variant. The International Energy Agency stated last month that rising oil demand suddenly reversed course in July and is expected to continue at a slower pace for the remainder of the year owing to the introduction of the COVID-19 Delta variant. Growth in the second half of 2021 has been significantly reduced, as new COVID-19 limitations in many key oil-consuming nations, especially in Asia, seem likely to decrease mobility and oil consumption.
The Paris-based IEA anticipates that demand decreased in July due to the fast spread of the delta variant in China, Indonesia, and other areas of Asia. They also estimated the demand drop at 120,000 barrels per day (BPD) last month and projected growth would be half a million barrels per day (BPD) lower in the second half of the year.
In stark contrast, the Organization of the Petroleum Exporting Countries (OPEC) maintained its estimates for global oil demand growth this year and additional expansion of 2022. It increased its forecast for supply next year from other producers, notably US shale drillers, which may stymie attempts by the organization and its partners, dubbed OPEC+, to restore market balance. This is despite growing worry over the rise in COVID-19 infections.
While OPEC maintained its demand estimate, many believe the near-term demand picture has worsened, suggesting that the organization may revise its supply plans downward at its next meeting.
However, the oil industry is optimistic that further immunization measures would help mitigate Delta’s economic effect. Last month, the Food and Drug Administration said that the vaccine produced by Pfizer Inc. and BioNTech SE had gained full approval, the first to do so. The aim now is that the authorized shot, which is available to anyone 16 years and older, will catalyze more vaccinations. Additionally, more companies may now demand vaccination.
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