London — OPEC has for the first time forecast the peak in global demand, estimating that the world's thirst for oil will stop growing in about 20 years.
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With the coronavirus pandemic prompting a re-examination of the oil market and countries becoming more aggressive on their sustainability targets, OPEC on Oct. 8 estimated that global demand would hit 109.3 million b/d in 2040 before declining to 109.1 million b/d in 2045 and plateauing "over a relatively long period."
The figures are contained in OPEC's latest annual World Oil Outlook, the bloc's energy market roadmap for the coming decades, and are its first official acknowledgement that oil consumption will not continue growing.
Still, the projections are far more bullish than what many major oil companies have begun to concede. BP, most notably, said in September that the market may never recover to pre-pandemic levels of roughly 100 million b/d, as the company charts a future invested heavily in renewables
OPEC, however, forecast that a "catching up" by the sectors most affected by COVID-19 lockdown restrictions would help a rebound in oil demand back to those volumes by around 2022.
In the immediate term, the outlook may help guide OPEC and its allies, including Russia, who are in the midst of a historic supply accord enacted during the depths of the coronavirus market meltdown, as they decide how long to maintain their current 7.7 million b/d production cuts, which are scheduled to taper to 5.8 million b/d for 2021 through April 2022.
Oil prices have wobbled around $40/b in recent weeks due to the economic uncertainty over rising infection rates in many countries, and speculation is rife on whether the OPEC+ alliance will tighten its quotas, or, alternatively, lose patience with its market management efforts.
"We hope that the fourth quarter of this year will be very healthy in a way that we continue draining the overhang of stocks into the first quarter of next year," said Ayed al-Qahtani, OPEC's director of research, in a press briefing. "But as we learn through the fourth quarter, we -- not just us, but many institutions and agencies -- will be revisiting forecasts."
More long-term, OPEC's planting the flag on peak demand underscores the competitive pressures the industry faces as the market shrinks. But the organization has long maintained -- and continues to do so in the 2020 outlook -- that oil will be a critical fuel for a long while yet.
And far from withering in a peak demand environment, OPEC said it figures to gain market share long-term, as higher cost producers fall by the wayside.
"With a longer perspective, we… see the growing importance of renewables and natural gas in meeting future demand," OPEC Secretary General Mohammed Barkindo said in the foreword of the report. "Nonetheless, oil will continue to account for the largest share of the energy mix by 2045, providing a stable foundation for addressing global energy needs for years to come."
OPEC market share
The organization, which is celebrating its 60th birthday this year, has found itself in the crosshairs of environmental activists in recent years, with Barkindo and ministers sometimes lashing out at efforts to ban oil and gas development, which they say ignores the reality of energy demand driven by population growth and global economic expansion.
The pandemic has dealt a blow to oil demand, and many governments and companies are accelerating their energy transition strategies to account for shifts in mobility and infrastructure.
Aviation, the industry hardest hit by the infection, may not see a full recovery until 2023 or 2024, OPEC said.
Its 2040 estimate of oil demand was a 1.3 million b/d downward revision from last year's report, which did not contain a 2045 forecast.
The organization, however, said OPEC and the oil industry would remain a crucial provider of affordable energy, especially for the developing world.
"Climate and environmental policies will continue to shape the future of energy," Barkindo said in the report. "Closely linked to climate change is the urgent need to close the energy poverty gap. COVID-19 is a stark reminder of the need to find inclusive and collaborative solutions to these global challenges and to create a more resilient future for humankind."
On the supply side, OPEC will have to contend with robust competition through at least 2030, the outlook said, as even the worst-impaired producers, including the US, recover from the virus setback.
But after 2030, the market landscape improves for OPEC members.
US production is set to peak at 20.3 million b/d in 2030, according to the outlook, a sharp reduction from the 22.8 million b/d expected by 2025 in last year's report. Brazil, Norway, Guyana and Kazakhstan will be other drivers of non-OPEC supply growth in the medium term.
From there, non-OPEC production will stagnate and decline, while OPEC's low cost of production should allow it to significantly boost its market share, with its total output including condensates accounting for 40% of global supply, or 43.9 million b/d, by 2045, compared with a 33% share from 35.9 million b/d output in 2030.
To meet future demand, upstream investment through 2045 will need to average $380 billion/year, or $9.9 trillion cumulatively, OPEC said.
Global oil demand