MOSCOW (Pakistan Point News / Sputnik - 30th December, 2020) Global oil demand will experience some growth next year after suffering one of the most severe contractions in the light of COVID-19, but it is unlikely to reach the pre-pandemic levels due to the remaining uncertainties, experts told Sputnik.
The outbreak of the pandemic this year has significantly reduced oil demand worldwide as employees have been working from home, some production facilities have been shut, and air traffic remains limited. Global oil demand is expected to contract by almost 9.8 million barrels a day (mbd) in 2020 and will amount to almost 90 mbd, according to the latest OPEC estimates. The International Energy Agency (IEA) forecast a downfall of 8.8 mbd this year, while demand is expected to stand at 91.2 mbd.
As for 2021, OPEC expects demand to reach 95.9 mbd, a 5.9 mbd increase from last year, while the IEA forecast demand at 96.9 mbd, a 5.7 mbd upsurge from last year. According to the IEA, jet fuel demand is not expected to recover quickly, while "considerable uncertainty remains about vaccines' efficacy, availability, and deployment." The agency noted in its December oil market report that a third wave of COVID-19 may occur and have a negative effect on demand.
However, Dr. Mamdouh G. Salameh, an international oil economist, in his comments to Sputnik disagreed with the forecast by IEA.
"My inclination has always been to ignore anything the IEA says about global oil demand because its projections and judgments are politically motivated. The IEA represents the major oil consumers in the world (mostly western consumers) and therefore it is motivated by ensuring low oil prices for its members. That is why its projections on the whole aim to depress oil prices deliberately," Salameh, who also serves as a visiting professor of energy economics at the London-based ESCP Europe business school, said.
The prospects for the oil market next year are very optimistic due to the launch of mass vaccination against COVID-19, according to the expert.
"I am very optimistic about the energy market situation next year. A case in point is that the mere announcement about the vaccine breakthrough led to a surge in Brent crude prices. The vaccine optimism and the momentum it has generated and the prospects of an opening of the global economy and a resumption of global travel will expand the global oil demand and push oil prices higher," Salameh said.
Oil demand may ultimately return to the pre-crisis levels of 101 mbd by mid-2021, the expert noted, saying that "a depletion of global oil inventories leading to a supply deficit in the second half of 2021 and oil prices hitting $60 in the first quarter of next year and probably $70-$80 by the third quarter."
Ekaterina Grushevenko, expert at the Moscow-based Skolkovo Energy Center, is less optimistic about the oil demand next year as a tangible effect from mass vaccination might only be seen over time.
"If the pandemic begins to decline (whether due to the effectiveness of vaccines or due to other factors such as herd immunity), then surely the demand for oil will begin to recover. However, it is not worth expecting that in 2021 the demand for oil will rise to the pre-pandemic levels, even if vaccines are effective, their large-scale use will take time," Grushevenko told Sputnik.
