The International Energy Agency (IEA) has lowered forecasts for global oil demand as renewed lockdowns to contain the COVID-19 pandemic temper the recovery expected this year.
In its latest oil market report, the IEA cut its consumption estimate for this quarter by 600,000 barrels a day, projecting a slight decline from the end of last year, Bloomberg reported.
Still, the world’s swollen oil inventories stand to abate by 100 million barrels in the three-month period as Saudi Arabia and other OPEC+ nations curb supplies.
The agency, in a monthly report, said: “The global vaccine rollout is putting fundamentals on a stronger trajectory for the year, with both supply and demand shifting back into growth.
“But it will take more time for oil demand to recover fully as renewed lockdowns in a number of countries weigh on fuel sales.”
Oil prices have rallied this year as Saudi Arabia announced additional production cuts to be made over the next two months. Brent futures traded above $55 a barrel in London yesterday, close to their highest in almost a year.
The gains have slowed though as a flare-up in virus cases prompts the return of lockdowns in many countries, including China, which has driven the recovery in fuel demand up until now.
For 2021 as a whole, the Paris-based IEA trimmed its demand forecast by 300,000 barrels a day. Global fuel consumption will increase by 5.5 million barrels a day this year, following an unprecedented collapse of 8.8 million a day in 2020.
The fragile outlook prompted the Organisation of Petroleum Exporting Countries (OPEC) and its partners at a meeting earlier this month to delay plans to restore halted output.
Saudi Arabia, which effectively leads the group, bolstered the strategy by promising to cut an additional one million barrels a day in February and March.
As the year progresses and the demand recovery gathers pace, the OPEC+ alliance should have the opportunity to open the taps a little, according to the IEA.
“Much more oil is likely to be required, given our forecast for a substantial improvement in demand in the second half of the year,” it said.
With global inventories on track for steeper declines in the second half, OPEC+ can proceed with plans to revive about 1.5 million of the 7.2 million currently offline, the agency said.
But it is expected that as the implementation of the vaccines increases, the pool of the virus-immune population, business activity will resume creating demand for refined petroleum products.
Barkindo: Renewables Not Replacing Fossil Fuels in Coming Decades
Meanwhile, OPEC Secretary-General, Dr. Sanusi Barkindo, yesterday said there was no scientific proof that renewable sources of energy would overtake the use of fossil fuels in future.
Speaking at the Atlantic Council Global Energy Forum 2021, themed: “The Geopolitics of the Energy Transformation,” he stated that though renewable sources of energy will continue to develop, oil and gas will remain relevant, occupying over 50 per cent of the energy mix by 2045.
He noted that with the world’s population projected to grow by 1.7 billion over the next two-and-a-half decades and the world economy more than doubling, oil and gas will remain relevant.
Highlighting the continued role of oil and gas in the global economy and its role in the energy transition, Barkindo said though OPEC was not opposed to the growth of renewable energy, all the talk about oil and gas suddenly becoming useless was not founded on facts.
“Although, there are some who believe the oil and gas industries should not be part of the energy future, that they should be consigned to the past, and that the future is one that can be dominated by renewables and electric vehicles, it is important to state clearly that the science does not tell us this.
“And the statistics related to the blight of energy poverty do not tell us this either. The science and statistics tell us that we need to reduce emissions and use energy more efficiently,” he added.
According to him, renewables are coming of age, with wind and solar expanding quickly, but even by 2045, they are only estimated to make up just over 20 per cent of the global energy mix.
He explained that oil and gas combined are forecast to still supply over 50 per cent of the world’s energy needs by 2045, with oil at around 27 per cent and gas at 25 per cent.
“We appreciate that some will view this as an OPEC forecast, dispute the numbers, and state that the organisation is against renewables.
“In response, it is clear that many OPEC member countries have great solar and wind resources, and huge investments are being made in this field. OPEC welcomes the development of renewables,” he said.
Barkindo stated that globally, the oil and gas market would require over $12 trillion investment between now and 2045, warning that there might be further energy shortfall without the investment.