As countries accelerate efforts to revive economies, the global oil demand is expected to recover higher than before, reaching 103.7 million barrels per day (bpd) by 2025, Opec (Organization of the Petroleum Exporting Countries) which is an intergovernmental organization of 13 nations, said in its annual oil outlook.
Incremental growth in oil demand growth will remain “relatively high” at 2.1 million bpd and 1.5 million bpd between 2022 and 2023, respectively, the exporters group said in its recently published World Oil Outlook 2045 survey.
The return of pre-COVID-19 economic growth rates, particularly in the developing world, as well as industries such as road transport, aviation, road transport and other industries looking to catch-up on demand will be the main drivers of growth in oil demand.
Medium-term growth will be characterized by “stabilization of growth in demand” with long-term patterns leading to “moderate annual incremental demand levels just above 1 million bpd,” Opec said.
Since 2016, in an alliance known as Opec+, Opec has joined hands with non-member producers led by Russia to conduct market corrections. Earlier this year, it made the largest cuts in history amidst the pandemic.
In order to tackle the market surplus caused by the downturn in demand because of halted air and ground travel, Opec+ cut back almost 9.7 million bpd between May and July.
Since then, the alliance has relaxed limits and following the relaxation of travel constraints worldwide, has started to increase production in line with rising demand for oil. The group is currently cutting 7.7 million bpd, with limited restrictions scheduled to remain in place until April 2022.
“The pandemic’s impact and resulting containment efforts precipitated one of the most tumultuous periods in the history of oil. The global industry faced an existential threat, especially in April 2020, when oil demand collapsed and storage capacity came dangerously close to being exhausted in some parts of the world.”
Despite a drop in energy demand in 2020, Opec predicts continued medium and long-term growth. Between now and 2045, the group expects global primary energy demand to rise by 72 million barrels of oil equivalent per day.
Between 2019 and 2045, Opec sees primary energy demand rising at an average rate of 0.9 percent. Demand is projected to grow from 289 million bpd in 2019 to 361 million bpd in 2045.
“In this regard, India, China and other developing countries with increasing populations and high economic growth play a key role in increasing energy demand while developed nations in the OECD [Organization for Economic Co-operation and Development countries] are exerting more of their efforts on energy efficiency and low-carbon technologies,” Opec said.
It is estimated that almost half of the overall growth in energy demand will come from India and China, the report added.
Despite many oil majors, such as Shell and BP, writing off the value of their hydrocarbon reserves this year, Opec continued to remain hopeful on oil prospects.
The group of oil producers expects a partial oil recovery in 2021, with medium-term, ‘stable’ growth rates anticipated. In 2025, oil demand is forecast to hit 94.4 million bpd.
“In 2019, oil represented for more than 31 percent of global energy demand and is projected to remain the largest contributor to the energy mix to 2045, accounting for more than 27 percent, followed by gas (about 25 percent) and coal (almost 20 percent),” the Vienna-based Opec said.