Global oil demand is on pace to fall by a record amount this year due to the pandemic, but will rebound to its largest increase ever in 2021, the International Energy Agency projected Tuesday.
World oil consumption will drop by 8.1 million barrels per day in 2020 to 91.7 million barrels per day before recovering by 5.7 million barrels per day in 2021, the largest annual increase ever recorded.
The world will consume 97.4 million barrels per day in 2021, still lower than the globe’s normal appetite of 100 million barrels per day before the coronavirus forced people into their homes and to drive and fly less.
Total oil demand might not fully recover to pre-coronavirus levels until 2023, the IEA said.
“While the oil market remains fragile, the recent modest recovery in prices suggests that the first half of 2020 is ending on a more optimistic note,” the IEA said.
But IEA’s forecast for oil demand the rest of the year is still 500,000 barrels per day more than it predicted last month, due to a faster than expected exit in countries from lockdown measures and a return to regular activities, especially in China and India.
Recovering demand, combined with a record removal of oil from the market by oil-producing nations and U.S. companies, has helped prices stabilize in recent weeks.
The international benchmark, Brent crude, was trading above $40 per barrel Tuesday morning, while the U.S. West Intermediate was at $37.85 after the price briefly dropped below zero during the depths of the health crisis.
Global oil supply plunged by 11.8 million barrels per day in May, the IEA said, driven by a historic production cut pact by Saudi Arabia-led OPEC and Russia, along with decisions by companies in the U.S. and Canada to shut down wells due to low prices.
U.S. production alone is expected to fall 10.5 million barrels per day in June, down by 2.4 million barrels per day from a record high set in November.
IEA does not expect the higher oil prices to be sufficient to drive U.S. producers back to normal activity. The U.S. oil and gas industry has lost more than 100,000 jobs since the pandemic-driven price crash began, the research group Rystad Energy projected Friday.
The IEA also warns of continued uncertainty in the demand recovery, with jet fuel consumption continuing to be a drag as people are less eager to return to flying as they are to drive again.
Jet fuel demand will rebound by only 1 million barrels per day in 2021, well below the pre-crisis level, after falling by 3 million barrels per day this year.
“We should not underestimate the enormous uncertainties,” IEA said.
