The world’s demand for oil will rebound to pre-pandemic levels by the end of 2022, as recovering economies require oil-producing countries to pump more fossil fuels, according to the International Energy Agency (IEA).
Members of the Organization of Petroleum Exporting Countries (Opec) and their allies, including Russia, collectively known as Opec+, will need to “open the taps to keep the world oil markets adequately supplied”, the global energy watchdog said in its monthly oil report.
Oil demand is expected to bounce back by 5.4m barrels a day this year, one of the fastest climbs on record, and by a further 3.1m in 2022, pushing consumption of crude above 100m for the first time by the end of next year, the IEA said.
It follows a record decline in 2020 as Covid-19 took hold around the world, temporarily closing factories, interrupting trade and applying the brakes to international travel, which caused demand to sink by 9m barrels a day.
The watchdog’s forecast of rising appetite for crude threatens to disappoint those who had hoped that global oil use might have peaked in 2019 before the pandemic, and underlines the “enormous effort required to get on track” to reach the energy sector’s goal of net zero carbon emissions by 2050, seen as crucial for fighting the climate emergency.
The IEA’s had warned a year ago that the world’s daily oil demand could climb faster in 2021 than ever seen before, unless more green policies are adopted to dampen consumption.
The vaccine rollout is expected to play a role in increasing oil consumption. The IEA cautioned that while the end of the pandemic is in sight in advanced economies, “slow vaccine distribution could still jeopardise the recovery in non-OECD countries”.
It predicted that the post-Covid recovery will be uneven across regions of the world, and the rebound in demand for oil will vary across sectors and products.
Paraffin and jet fuel will see the biggest leap in demand, rising by 1.5m barrels a day year on year, as air travel slowly restarts following the pandemic, although the IEA anticipates the aviation sector to be the slowest to experience a full recovery, as travel restrictions are expected to stay in place for some time.
The IEA forecasts smaller leaps in demand for gasoline and diesel as people return to their cars, but it predicts this will remain below pre-Covid levels, as a result of a permanent switch to more home working, and increasing sales of electric vehicles and more efficient cars.
The IEA does not anticipate any problems with oil producers being able to meet rising demand, but added that the timing of any lifting of sanctions on Iranian oil was important.
Opec+ slashed oil production at the start of the pandemic in 2020, and has gradually unwound the cuts, but has not laid out its plans beyond July.
Rising demand for oil has been pushing crude prices higher in recent weeks. They moved above $72.70 a barrel on Friday, one day after closing at their highest since May 2019.
“A reopening of Europe, strong Chinese industrial activity and recent encouraging signs from the US provide bullish signs to traders across the world, and are key drivers for the ongoing rally,” said Louise Dickson, an oil markets analyst at consultancy firm Rystad Energy.
Dickson added there is consensus that Opec+ will have to end its conservative approach to oil production which has been in place since 2020. “Opec+ will need to loosen the valve and bring more supply back faster, otherwise risk a further price surge,” she said.