LONDON (ICIS)--There are early “signs of a healthy recovery” in 2021 but the recovery in crude demand will lag as transportation is not set to fully recover any time soon, the producing cartel OPEC said on Thursday.
Petrochemicals activity, however, will remain healthy and continue to support demand from crude oil, which has found in the industrial sectors an ally to keep a determining role in the global energy mix as transport electrifies in coming decades.
Before transport electrifies, however, the gasoline and derivatives used to fuel mobility will still remain somewhat redundant in 2021 as demand from those sectors is not set to recover pre-pandemic levels this year.
Travel remains practically at a standstill and as governments battle to contain the spread of the pandemic, with the aviation’s jet fuel market in the doldrums, and restrictions to mobility continue denting demand for crude in road transport.
The transportation sector amounts to around 50% of total crude oil demand, according to OPEC.
OPEC expects crude oil demand is forecast to grow by 5.8m bbl/day in 2021, not yet recovering the ground lost during the pandemic.
At 96.1m bbl/day, the expected demand for crude oil will remain far from the pre-pandemic 100m bbl/day of 2019.
The historic fall for 2020 stood at 9.7m bbl/day, with global demand at 90.3m bbl/day.
“Global GDP growth is projected to rebound based on positive developments, particularly in the US, China and India in Q1 2020,” said OPEC.
“With regard to oil demand, the negative impact of the containment measures on transportation fuels is expected to carry over, particularly into Q1 2021, with a stronger rebound in oil demand growth, especially for industrial fuels, forecast in H2 2021.”
A big chunk of the recovery in crude oil demand this year will come from the industrial sectors, where activity in 2020 decreased to a lesser extent than in the 2008-2009 financial crisis.
The trend is set to continue in 2021, with demand from industrial sectors remaining healthy and, together with a partial recovery in transport, making up for the 5.8m bbl/day gain in demand for crude this year.
OPEC forecasts global growth in 2021 at 4.8%, year on year, sharply up from its previous forecast of 4.4% due to better-than-expected economic performances across the globe in the fourth quarter of 2020.
According to this estimate, the world’s economy would recover by the end of this year the pre-pandemic levels, after global GDP fell by 3.9% in 2020, as per OPEC.
However, OPEC adopted a more realistic tone as the pandemic could, once again, derail the pace of recovery.
The crude cartel is also wary that the post-pandemic economy may not be the same, affecting its core business as transport fuels change and climate policies bite fossil fuels; these factors deserve “close monitoring”, said OPEC.
“The ongoing Covid-19 pandemic, challenging unemployment levels, trade constraints, the pace of vaccinations as well as the impact of the announced economic stimulus measures [in the US and other major economies] into the real economy will continue to cause a large degree of uncertainty,” it said.
“Moreover, the ongoing degree of substitution, phasing out of subsidy programmes, the impact of commissioning, delays, and/or closure of downstream projects, as well as programmes for fuel efficiencies, will all require continued close monitoring during the course of the year.”
Earlier on Thursday, the International Energy Agency (IEA) also said the crude oil market's rebalancing remained "fragile", despite recent gains in crude oil prices.