Opec expects oil demand to keep growing for the next two decades, in contrast to large segments of the energy sector that believe a peak in consumption is close. The research arm of the producers’ cartel said in its annual outlook that its base case was for demand to grow from 90.7m barrels a day this year to 109.3m b/ d in 2040, before leveling out over the following five years.
Oil consumption collapsed this year from close to 100m b/d in 2019 after governments enacted measures to curb the spread of coronavirus, reducing travel by air and road. In response to the drop in demand, crude prices fell from $70 a barrel in January to below $20 a barrel in April, leading Saudi Arabia-led Opec and Russia to agree record supply cuts to balance the market.
While Opec’s report acknowledged uncertainty about the pandemic’s duration and the difficulty in assessing its longer-term impact on oil demand, it highlighted swelling populations and the growing ranks of middle classes in emerging markets as supports for continued oil consumption. Lower oil prices and a drop in investment could rekindle demand growth as in the past, it added. It is also less optimistic than other energy bodies about the adoption of electric vehicles.
“Oil will be needed for years to come, and even if demand plateaus in the long term, it will remain a key fixture in the energy mix,” Opec said in the report. The assessment is at odds with some others in the oil industry. BP modeled three scenarios in its energy outlook in September that all suggest oil demand will fall over the next 30 years. Two of them imply consumption will never fully recover to pre-pandemic levels.
Opec appears to assume that the impact of the pandemic on demand will prove fleeting. It projects oil demand will partly recover in 2021″ assuming that the Covid-19 pandemic is largely overcome by next year”. The cartel forecasts relatively high annual rates of increases taking demand to 103.7m b/d by 2025. It attributes this to a return to pre-coronavirus economic growth and demand “catching up” particularly in aviation, road transport and industry.
This comes even as the aviation industry itself has warned it might take as long as 20 years for global passenger jet demand to return to its previous highs, particularly for the aircraft used in long-haul