Global oil demand has been hit harder than expected by the COVID-19 outbreak, the Organization of the Petroleum Exporting Countries (Opec) said Tuesday. As a result, major producers have signalled an extension of their output cuts through 2021.

Oil prices have been volatile in recent days as a result of the outbreak, which has led to calls from major producers for production cuts to be rescheduled. Algeria's Energy Minister Adel Al-Atar said On Monday Opec plus, which includes Russia and other oil producers, may extend its current 7.7 million b/d production cut to 2021 or further increase it if necessary.

In its monthly report on the same day, Opec said it had cut its forecast for global oil demand in 2020 by a further 300,000 b/d to 9.8m b/d, 10 per cent below last year's level.

Europe's covid-19 blockade and weakening US consumption trends mean global oil demand will be hit harder than previously thought by 2020, the report said.

The outlook for the oil market in the coming months was also clouded by Opec's robust non-member supply forecast and a cut in its forecast for global economic growth in 2021 from 4.5 per cent to 4.4 per cent.

Weak transport demand and a sluggish RECOVERY in the US have also weighed on oil markets, prompting Opec to cut its forecast for OECD demand by 500,000 b/d.

At the same time, Opec, in adjusting its forecasts, cautioned that "these forecasts do not take into account further economic positive factors, which could come from an effective coVID-19 vaccine that could be widely available as early as the first half of next year". Oil prices rose by more than 10% this week on news that a covid-19 vaccine developed by Pfizer and BioNTech was 90% effective in early tests.

However, market participants believe that the short-term outlook for the oil market remains bleak. A new blockade in Europe and increased oil supply pose two major challenges in the final quarter of 2020, ubs Wealth Management commodities analyst Peter Staunovo said, according to Reuters.

On the supply side, Opec cited secondary sources as saying Libyan production rose 299,000 b/d in October after ending an eight-month embargo on oil exports. Libya's national Oil Company said it had already produced 1m b/d and would not join the cuts until production reached 1.7m b/d.

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