Global oil demand will rebound by more than 6 million b/d in 2021 and return to 2019 levels a year later despite the sharp acceleration in COVID-19 infections and new lockdowns which have hit energy consumption from the end of last year, according to S&P Global Platts Analytics.
Oil demand is expected to average 99.3 million b/d this year following a contraction of 8.8 million b/d to 93.1 million b/d in 2020, Platts Analytic said in its latest monthly oil market forecast. The 2021 forecast is a 280,000 b/d downward revision to its previous estimate, reflecting the surge in COVID-19 infections at the end of 2020 which continue to crimp global mobility levels.
For the first quarter of 2021, the oil demand forecast was cut by 700,000 b/d to 95.1 million b/d due to renewed lockdowns and scaled-back Lunar New Year celebrations in China, Platts Analytics said. During the second quarter, however, the impact of vaccination roll-outs are expected to be widely felt with global demand rebounding by as much as 11.7 million b/d year on year.
"After stalling in the early part of 2021, the world economy is expected to turn stronger starting from spring, as the wider availability of vaccines will lift consumer sentiments," Platts Analytics said.
Further out, oil demand is expected to grow by 2.8 million b/d in 2022 when global oil demand will largely return to 2019 levels at 102.1 million b/d.
"Growth continues to bear the feature of recovery from 2021 which is still affected by COVID-19," Platts Analytics said.
Oil price forecast
The estimates come a week after the International Energy Agency cut its estimate of the recovery in global oil demand this year for a third month in a row, also citing renewed COVID-19 lockdowns and the scale of the global vaccination challenge. The IEA estimates oil demand will recover to average 96.64 million b/d this year, a 5.5 million b/d recovery from 2020 levels.
In its own monthly oil market report a week earlier, OPEC slightly raised its oil demand forecast for 2021 to 95.91 million from 95.89 million b/d, a 5.9 million b/d recovery from 2020.
With demand levels expected to recover sharply, continued production cut discipline by OPEC+, and the overhang in global oil stocks narrowing over the year, Platts Analytics raised its 2021 average Brent oil price forecast by $6.65/b to $56.30/b. Dated Brent is seen rising from current levels to $59/b in July and August before dipping back to $55/b by year-end.
"Oil balances tighten heading into Q3 with a seasonal summer demand boost, higher refinery runs, and an improving outlook for the COVID situation amidst ongoing vaccinations," Platts Analytics said.
Oil market watchers have been raising their 2021 price forecasts in recent weeks following Saudi Arabia's surprise decision to slash another 1 million b/d from its crude production in February and March.
On Jan. 25, Barclays raised its average Brent oil price forecast for this year by $2/b to $55/b citing "transitory factors" including the impact of frigid winter temperatures in Asia on oil demand and a weaker US dollar.
Goldman Sachs sees Brent crude rising to $65/b by the middle of 2021 while UBS raised its forecast for Brent crude to $60/b by mid-2021.
