Global oil demand is set for a rebound between now and the end of next year, with consumption expected to rise from current levels by as much as 8 million barrels per day (bpd) by end-2022, according to the world’s largest independent oil trader, Vitol Group.
“We will need all eight cylinders to get through 2022,” Vitol’s chief executive Russell Hardy told Bloomberg in an interview published on Tuesday.
Currently, oil demand is somewhere 3.5 million bpd below the “normal” levels of 2019, when consumption was around 100 million bpd, according to Hardy.
But reopening economies and Asian demand are set to support a strong demand rebound by the end of this year and into 2022, Hardy said. Demand for jet fuel will recover more slowly than other oil products and would still be 1.5 million bpd below 2019 levels by year end. Still, a surge in other products, especially in petrochemicals, will offset the lag in jet fuel demand recovery, Vitol’s executive told Bloomberg.
The record oil surplus of 1 billion barrels amassed last year is already more than halfway drained, Hardy said. At the current pace of drawdowns of 2 million bpd, the remaining excess oil stocks will be depleted by the end of the third quarter this year, even with the planned OPEC+ increase in production of 2 million bpd through July, Hardy told Bloomberg.
Vitol’s view on the oil glut is similar to that of other forecasters and analysts, who say that the end of the excess inventories is in sight.
For the rest of this year, OPEC+ will continue to be the market manager, and it would be up to the alliance to ensure a balanced market with demand surging, because the group holds the largest spare capacity, Hardy told Bloomberg.
“That’s going to come from OPEC because there is no other massive expansion coming because there is generally capital discipline across the West,” Hardy said.
By Tsvetana Paraskova for Oilprice.com
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By the second half of 2022 and the first quarter of 2023 we may even see $100 oil triggered by a global supply-deficit estimated at 10.0 mbd.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London