An uneven oil demand recovery across different regions and product types will see oil demand climb by 6.3 million b/d in 2021, according to the latest forecast by S&P Global Platts Analytics.
But despite the recovery, oil demand will still be 2.4 million b/d below pre-pandemic levels and risks will remain elevated and skewed to the downside. Platts Analytics said in a Nov. 23 note.
Platts Analytics also trimmed its oil demand forecast for this year due to the second wave of coronavirus infections. It now expects oil demand to fall by 8.7 million b/d in 2020 from its previous assumption of an 8.5 million b/d reduction.
These assumptions are similar to the demand forecasts by the International Energy Agency.
On Nov. 12, the IEA in its most recent oil market report, said oil demand would plunge by 8.8 million b/d in 2020 because of the resurgence of the coronavirus in the West.
But like Platts Analytics, the Paris-based agency also upwardly revised its 2021 oil demand estimates.
The IEA expects oil demand to climb by 5.8 million b/d in 2021 but said it does not expect vaccines to resuscitate the oil market before well into next year.
Vaccines, economy
The demand recovery in 2021 is based on a global GDP growth of 5%, with oil prices expected to range between $41-51/b, according to Platts Analytics.
But vaccine deployment will be a critical variable, affecting oil demand positively if developed and applied quicker than expected, the note said.
The vaccination campaign will begin in H1 2020, with a widespread rollout only expected in the second half of 2021.
Chinese oil demand will only grow 500,000 b/d or 3% next year, as the world's largest oil importer reported a steady demand increase in the second half of the year.
US oil demand is forecast to grow by 1.7 million b/d next year, with Europe expected to rise by 1.1 million b/d, Platts Analytics added.
Gasoline demand will rebound the strongest next year followed by jet fuel and then by gasoil/diesel.
"Global gasoline demand will recover by 2.4 million b/d or 10% and gasoil/diesel demand to rise by 1.3 million b/d or 5%," the note added.
Jet fuel has been the biggest casualty of the coronavirus pandemic as aircraft fleets have been grounded and borders closed.
Jet fuel normally accounts for 8% of total oil demand, but in 2020, this has more than halved.
S&P Global Platts Analytics expects global jet and kerosene demand to grow by 1.5 million b/d next year, but it will still be 20% below pre-pandemic levels as business travel is likely to remain capped.
"The pandemic has left international travel, both for leisure and business, heavily reduced across the globe and the availability of vaccines will not provide immediate relief," the note said.
Trade tensions like US-China relations along with the finalization of Brexit will be bearish for oil demand.
A warmer winter in the northern hemisphere will also be another downside risk, according to Platts Analytics.