Global oil demand will likely take another year or so to return to pre-pandemic levels—by late 2021 or early 2022, energy expert and IHS Markit vice chairman Daniel Yergin told Al Arabiya English in a video interview on Monday.
Yergin’s expectations for oil demand are roughly in line with the forecasts by the International Energy Agency (IEA) and OPEC, which don’t expect annual oil demand to return to the pre-COVID levels next year, despite the projected rise compared to this year’s slump.
Continued low demand for jet fuel will account for 80 percent of next year’s 3.1-million-bpd gap in oil demand compared to pre-pandemic levels, the IEA said in its monthly Oil Market Report earlier this month. OPEC also revised down its oil demand projections for this year and next in its Monthly Oil Market Report for December, expecting 2021 oil demand at 95.89 million bpd, down 410,000 bpd from its projection of 96.3 million bpd from November.
IHS Markit’s Yergin doesn’t see the biggest disruption on the oil market as either bringing forward or delaying peak oil demand.
“At the end of the day, it won’t have much impact on peak oil demand, which I still think will be around 2030 or so,” Yergin told Al Arabiya English.
The Pulitzer-Prize winning energy author also discussed the U.S. shale patch and the chances of it returning to the rapid growth in production in the years just before the 2020 price crash.
“Let me give you a very simple answer, the answer is no,” Yergin told Al Arabiya English when asked if U.S. oil production could return to 1.5-million-bpd annual growth.
According to IHS Markit, shale production will stay relatively unchanged at around 11 million bpd until late 2021, before it starts rising, but it will increase at a much more moderate pace.
“So that 1.5 million barrels per day, that two million barrels per day that was so disruptive for the oil market, that’s history,” Yergin told Al Arabiya English.
By Tsvetana Paraskova for Oilprice.com
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A positive indication is that oil demand and crude oil imports by China, the world’s largest importer of crude oil and India, the third largest, have already exceeded 2019 levels despite the COVID-19 pandemic. One can then imagine how the global oil demand will respond once the global economy is back in normal economic activity.
That is why I project that global oil demand will be back to pre-pandemic levels in the second or third quarter of 2021 with Brent crude price hitting $60 a barrel in the first quarter and testing $70-$80 in the third.
I don’t see a comeback of US shale oil production soon (if ever). Shale oil’s importance to the global oil market has diminished precipitously.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London