The hit to oil demand triggered by the coronavirus pandemic will endure into 2021, the International Energy Agency said, with air travel expected to take far longer to recover.
In its first forecast for next year, the IEA said demand would grow by 5.7m barrels a day to 97.4m b/d. While this is a rebound from the 8.1m b/d fall in 2020 — the largest in history — total demand will remain 2.4m b/d below the 2019 level.
In its monthly oil market report, the IEA said the “dire” situation of the aviation sector was largely to blame, with passenger traffic this year expected to be almost 55 per cent lower than in 2019.
“The industry will continue to be a drag on oil demand through 2021,” the Paris-based body said. Jet fuel demand will drop by 3m b/d in 2020 but only rebound by 1m b/d in 2021, again leaving it below pre-coronavirus levels.
Global producers agreed to curb oil output to bring some stability to the market in response to the demand shock, as governments enacted travel bans and lockdowns of entire countries at the start of the year.
In April, Opec and allies outside of the cartel including Russia agreed to record collective cuts of 9.7m b/d. Earlier this month, they decided to keep these curbs in place until the end of July, before they gradually ease the cuts.
Global oil supply — including production falls from US, Canada and elsewhere — plunged 11.8m b/d in May. On average supply is expected to drop by 7.2m b/d this year with global oil output set for a modest 1.7m b/d recovery in 2021.
Brent crude, which fell to 18-year lows in April below $20 a barrel, has since recovered to about $40 a barrel as oil demand picks up around the world and as the supply cuts take effect.
“If recent trends in production are maintained and demand does recover, the market will be on a more stable footing by the end of the second half [of 2020],” the IEA said.