NEW DELHI: The difficulty in controlling the spread of the pandemic in many developing countries has led to a sharp cut in the demand outlook of crude oil cartel Organization of the Petroleum Exporting Countries (OPEC). On Monday, the cartel led by Saudi Arabia said that the challenge being faced in countries such as India is likely to see lower crude oil demand, cutting forecast for 2020 and 2021 by 400,000 barrels a day.
OPEC said it now expects a drop in demand of 9.5 million barrels a day in 2020 and a rise of 6.6 million barrels in 2021.“Risks remain elevated and skewed to the downside, particularly in relation to the development of COVID-19 infection cases and potential vaccines,” the cartel said in a monthly report.
The revised more pessimistic outlook is likely to see crude oil prices trend lower than their current levels. In fact, brent crude has already slipped below $40 a barrel on Monday, trading at $39.76 per barrel.
The fall is likely to significantly mitigate the significant cash shortfall facing the Indian government, which has siphoned off all of the benefit from crashing crude oil prices over the summer. According to the Ministry of Petroleum, India’s crude oil import bill fell to a third in the first four months of the current fiscal due to the summer crash in crude rates.