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Global oil demand unlikely to have peaked due to pandemic: IEA's Birol

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Global oil demand unlikely to have peaked due to pandemic: IEA's Birol

Highlights

Oil demand seen recovering to above 100 million b/d

Skeptical over impact of long-term lifestyle changes

IEA sees oil demand recovery taking until at least 2022

  • Author
  • Frank Watson    Robert Perkins
  • Editor
  • Debiprasad Nayak
  • Commodity
  • Oil
  • Topic
  • Coronavirus and Commodities

Global oil demand will likely to recover to above pre-pandemic levels in the future despite some predictions that the crisis may have already triggered a structural decline in world oil consumption, the head of the International Energy Agency said July 6.

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Most market watchers see global oil demand recovering to pre-COVID levels of around 100 million b/d over the next two years after collapsing by an expected 8 million-9 million b/d in 2020. Last month, the IEA forecast that global demand for crude is not expected to recover until 2022.

Last week, however, Norwegian energy consultants DNV GL said oil demand may have already peaked as the coronavirus pandemic accelerates the world's transition to low carbon, renewable energy sources.

When asked whether he thought the world had already passed peak oil demand, Fatih Birol said: "If oil demand goes back to 100 million b/d I would not be surprised. And under a strong recovery, I would not be surprised if it went higher than that."

As the global economy slowly restarts from lockdowns, political parties, business leaders and environmental groups have been calling for more climate-friendly policies to 'bake-in' behavior changes in order to speed the transition away from fossil fuels.

But Birol was skeptical that hoped-for, long term behavior changes, such as more remote working and less commuting, would make a significant impact on future oil demand.

"Some say demand for oil is falling because we are changing our lifestyles. I'm not so sure. Teleworking alone is not going to send oil demand lower. We will need the right policies," said Birol.

In its June oil market report, the IEA said the estimated recovery in 2021 puts oil demand 2.4 million below 2019 levels at 97.4 million b/d.

S&P Global Platts Analytics currently sees global oil demand about 3 million b/d lower than its pre-COVID forecasts out to 2040, with jet fuel and marine fuels suffering the biggest losses. Rather than accelerating peak oil demand, however, Platts Analytics believes it could be extended by about a year to 2041 due mostly to the expected resilience of long-term petrochemicals demand.