Oil Demand Won’t Rebound To Pre-COVID Level Until 2023, Says IEA

By - Anuj

Source: Anan Kaewkhammul, Shutterstock

The International Energy Agency (IEA) has projected that global oil demand will not attain its pre-coronavirus levels until 2023. The agency estimates an average fuel consumption of over 101 million barrels a day (mb/d) by 2023.

Oil demand in 2020 was nearly 9 mb/d below the levels recorded in 2019.

Crude oil prices have rallied over 30 per cent this year, recovering from the unprecedented plunge due to the COVID-19 outbreak in 2020.

The IEA, which tracks the global oil demand closely, stated that the global demand is expected to touch 104.1 mb/d by 2026. This means a rise of 4.4 mb/d from 2019 levels.

However, by 2025, the oil consumption will be approximately 2.5 million barrels less than what the IEA anticipated last year.

The usage of oil will be moderated for the next three years in the wake of new work-from-home culture and green fuel shift, the agency added. As the homebody trends remain and policymakers pursue climate change curb measures, fossil fuel use will lose momentum.

The Paris-based agency emphasized that the oil demand may never catch up with its pre-COVID curve. As per its annual medium-term outlook, the oil market may not be normalized in the post-pandemic era. 

OPEC+ Oil Production Cut Initiative & Lower Investment

The Organization of the Petroleum Exporting Countries (OPEC) has already appealed to its members and affiliates to curtail oil production.

In 2020, upstream investments and expansion went down by 30 per cent YoY. The IEA predicts this will recover marginally in 2021.

Meanwhile, North American oil drillers have been piling up their crude inventories and defying OPEC+ countries’ pledge to cut production. However, the lower investment could force the US to produce oil at a modest pace. 

Source: Kalkine Group @2020

On the back of the energy agency’s global oil demand outlook, the crude oil WTI Futures has declined more than 1 per cent to US$ 64.00 a barrel on early Wednesday morning, March 17 (noted at 8:27 AM ET).

Crude prices have rebounded from its last year’s crash, soaring to nearly US$ 68 a barrel this month. This rise has been driven by higher demand from Asia and collaborative production slashes by the OPEC+ affiliated guided by Saudi Arabia.