There’s growing consensus that oil demand won’t make a comeback

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Oil demand is in a slump and it won’t recover any time soon.

In its September Oil Market Report, published Tuesday, the International Energy Agency (IEA) predicted annual demand would contract by a volume equivalent to 8.4 million barrels per day, compared to 2019. That’s steeper than the 8.1 million bpd slump the IEA predicted last month.

“In last month’s report, we said that the market was in a state of ‘delicate re-balancing.’ One month later, the outlook appears even more fragile,” the IEA said, attributing demand disruption mostly to the pandemic. Next year, the IEA expects demand to rebound by 5.5 million bpd but still warns “the path ahead is treacherous.”

The IEA wasn’t the only oil group to make a depressed forecast this week. OPEC revised its forecast for the year down by 400,000 bpd; the cartel now predicts 2020 average demand will slump a total 90.2 million bpd. OPEC revised down its 2021 predictions, too, saying that “structural changes to the global economy are forecast to persist.”

Next on the list: BP. In the British oil and gas giant’s Energy Outlook, published Monday, BP outlines three possible growth scenarios between now and 2050—dubbed Rapid, Net Zero and Business as Usual. In all scenarios, oil demand peaks within the next decade, although the first two scenarios suggest the peak has already come.

While I call these outlooks “depressed,” I mean it only in an economic sense. It’s good that oil demand is waning as the world should be in a rush to wean itself off of fossil fuels. The transition will be disruptive, but the sooner industry leaders recognize the reality of it, the better they can mitigate the economic fallout that will inevitably come.

More below.

Eamon Barrett
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