Hopes for vaccines do not cause a revival in oil demand forecasts.

You might think that the excitement around the announced vaccine will improve the prospects for oil. Not so fast ...

The International Energy Agency, the Organization of Petroleum Exporting Countries and the US Energy Information Administration issued new forecasts following Monday's announcement of a vaccine by drug maker Pfizer Inc. and biotechnology company BioNTech SE. But so far, there have been no major upward changes in oil demand forecasts after the news. In fact, just the opposite.

Short-term obstacles to oil demand continue to outweigh any positive signals from the vaccine trial results, as oil producers will have to face a difficult few months until the middle of next year and an uncertain recovery after that.

In the short term, the prevailing forecasts are for a reduction in oil demand rather than a recovery. All three major agencies lowered their forecasts for global oil demand for the current quarter and the first half of 2021.

European Agencies (IEA and OPEC) are very pessimistic about the impact of restrictions on oil demand, reducing consumption estimates in 4Q20 by about 1.2 million barrels per day compared to what they predicted last month. EIA has reduced the volume of production and is much more modest having a total of 300,000 barrels per day.

Everyone agrees that there will still be no global demand in the Northern hemisphere during the cold winter months in the first half of 2021 as the blockage of countries continues. The IEA warned that "vaccines are unlikely to significantly increase demand until next year."

Forecasts for the second half of 2021 are diverse as the IEA raises its demand estimates for both the third and fourth quarters. This may reflect the fact that it was the last to publish its November report. It just made it possible to assess the potential effects of the vaccine; the EIA report was published just a day after the vaccine was announced.

OPEC and the IEA both lowered their estimates of global oil demand.

Another challenge for the producer group is the rapid recovery of oil production in Libya, which is occurring at an inconvenient time for the rest of the group and at a much faster pace than initially anticipated.

The production in North African countries rose to 454,000 barrels per day in October, up from 155,000 barrels in September according to six secondary sources used by OPEC. On average, it is approaching 1 million barrels a day this month, and the country hopes to reach 1.3 million barrels a day by the end of the year.

This additional offer from Libya was not factored into calculations made by the OPEC + group, which links OPEC countries to a group of external allies, when it decided back in April that it could reduce record production cuts for the second time at the end of the year.

As the group's production agreement, from which Libya is exempted, the producers plan is to add another 1.9 million barrels per day to global supplies from the beginning of 2021. It may seem doubtful that they would be able to do this without undermining prices. According to the latest forecasts from the world's three largest forecasting agencies, it is highly likely that they will have to extend the current level of cuts when they meet in less than three weeks.