Demand by 2025 greater than pre-Covid levels
▶ Opec forecasts global total will reach 103.7 million barrels per day
Opec expects global oil demand to rebound higher than before the pandemic, reaching 103.7 million barrels per day by 2025, as countries accelerate efforts to revive economies, the group said in its annual oil outlook.
Incremental increase in oil demand growth will remain “relatively high” between 2022 and 2023 at 2.1 million bpd and 1.5 million bpd, respectively, the exporters group said in its World Oil Outlook 2045 report on Thursday.
The return of pre-Covid-19 economic growth rates, particularly in the developing world, as well as industries such as aviation, road transport and industry looking to “catch up” on demand will be the biggest drivers behind demand growth.
Growth over the medium term will be marked by “normalisation of demand growth” with long- term trends leading to “moderate levels of annual incremental demand just above 1 million bpd”, Opec said.
“The pandemic’s impact and resulting containment efforts precipitated one of the most tumultuous periods in the history of oil,” Opec secretary general Mohammed Barkindo said.
“The global industry faced an existential threat, especially in April 2020, when oil demand collapsed and storage capacity came dangerously close to being exhausted in some parts of the world.”
The existential threat Mr Barkindo refers to is the dramatic collapse in West Texas Intermediate, the benchmark for US oil, which fell below zero to trade briefly at minus $40 per barrel in April close to the expiry of its May contract.
The plunge was largely owing to overcapacity constraints at its main delivery point in Cushing, Oklahoma and industries coming to a standstill as a result of the pandemic.
Since 2016, Opec joined hands with non-member producers led by Russia in an alliance known as Opec+ to carry out market corrections. It made the biggest cuts in history earlier this year.
Opec+ cut back nearly 9.7 million bpd between May and July to counter the glut in the market reinforced by the slump in demand caused by halted air and ground travel.
The alliance has since relaxed restrictions and has begun increasing output in line with rising demand for crude, following the relaxation of mobility restrictions worldwide.
Currently, the group is cutting back 7.7 million bpd, with tapered curbs set to remain in place until April 2022.
In spite of the drop in demand for energy in 2020, Opec forecasts continued growth medium and long-term. The group expects global primary energy demand to grow by 72 million barrels of oil equivalent per day between now and 2045.
Opec expects primary energy demand to grow at an average rate of 0.9 per cent between 2019 and 2045. Demand over this period is expected to expand from 289 million boepd in 2019 to 361 million boepd in 2045.
“In this regard, India, China and other developing countries with increasing populations and high economic growth play a key role in increasing energy demand while developed nations in the OECD [Organisation for Economic Co-operation and Development countries] are exerting more of their efforts on energy efficiency and low-carbon technologies,” Opec said.
Nearly half of total energy demand growth is expected to come from India and China, the report added. Opec continued to bet on bullish prospects for oil despite several oil majors such as Shell and BP writing off the value of their hydrocarbon assets this year.
The oil producers group expects a partial recovery of oil in 2021, with “healthy” growth rates expected over the medium term. Oil demand is expected to reach 94.4 million boepd in 2025.
“In 2019, oil represented for more than 31 per cent of global energy demand and is projected to remain the largest contributor to the energy mix to 2045, accounting for more than 27 per cent, followed by gas [ about 25 per cent] and coal [almost 20 per cent],” the organisation said.