Oil analysts say a rebound in global demand for oil has already started, and that the plunge in demand attributed to the COVID-19 pandemic has been far less than that predicted by many experts.
Amrita Sen, co-founder and director of research for the international consulting firm Energy Aspects, says that the rebound in demand will outweigh producers’ ability to restore supply, which will push up the average price of Brent oil by about US $ 43 per barrel this year to US $ 66 next year, and US $ 83 in 2023.
In a presentation at TD Securities’ virtual energy conference, Sen said the containment measures put in place during the pandemic had convinced some analysts to forecast a 30% to 40% drop in demand global prepandemic oil of around 100 million barrels per day.
Sen’s organization expected the decline to reach 28 million barrels per day, but the decline peaked at 18 million barrels per day in April. The industry’s “unused capacity” has now decreased to around 12 million barrels per day.
Sen says the less pronounced drop in demand and the rapid recovery illustrate how dependent the world is on crude oil and suggests that its dependence on oil will not be reduced in the short term.
In energy price forecast released Monday, accounting firm Deloitte also notes recovery in demand for oil and forecasts that Brent crude prices will drop from an average of US $ 39 per barrel this year to US $ 46.50 in 2021, as well as US $ 64 in 2023.
“The market thought demand would drop between 30 and 40 million barrels a day,” said Sen, noting that spot oil prices had fallen to negative levels at one point because investors thought the demand would plunge to extremely low levels.
“COVID was apparently going to accelerate the peak in demand for oil, (but) I would go the other way and say that in fact COVID showed us how much oil was needed. Even in the worst case, demand has dropped by less than 20%.”