Oil demand will rebound more slowly than initially anticipated in 2021 as the aviation sector takes longer to recover from the coronavirus hit, the International Energy Agency said on Tuesday.
Global consumption is expected to come in at 96.9m barrels a day next year, it said. While this is up from the 91.2m b/d forecast for 2020, it is about 200,000 b/d below what the Paris-based body predicted in November.
In its monthly market report, the IEA said governments would probably keep in place border closures and travel restrictions until a vaccine was widely available, extending the disruption to the airline industry.
“Demand is clearly going to be lower for longer than expected,” the IEA said.
The body, which advises big economies on energy matters, added that while consumers might be keen to resume holidays once travel bans were lifted, older people would remain cautious.
Others affected by the financial impact of the pandemic will have less to spend on tickets, it predicted, while business travel will probably remain muted as companies keep a tight rein on costs.
Oil prices crossed back above $50 a barrel earlier this month for the first time since March, fuelled by optimism that a rollout of Covid-19 vaccines could spur economic activity and a recovery in oil demand. Brent crude, the international marker, was broadly flat in early trading on Tuesday at $50.23 a barrel.
While the IEA noted “the understandable euphoria” around the start of inoculation programmes, it said “it will be several months before we reach a critical mass of vaccinated, economically active people and thus see an impact on oil demand”.
The group warned that the Christmas period could bring another surge in Covid-19 cases and the possibility of more confinement measures.
“It is possible that, after the upcoming holiday season, a third wave of the virus will affect Europe and other parts of the world before vaccines have time to take effect. This would bring renewed downward pressure on oil demand,” said the IEA.
Crude stockpiles that had built up as consumption dropped were unlikely to deplete until the end of 2021, it added.
On the supply side, global oil production rose 1.5m b/d in November to 92.7m b/d as the US sector recovered from hurricane shut-ins and Libya built its output back up.
The IEA said the deal struck this month by Opec and allied producers such as Russia to increase supplies by 500,000 b/d next month — well below the 2m b/d initially planned — was “based on a recognition that the market remains fragile and is in need of careful adjustment”.
Opec also trimmed its own forecasts for demand at the start of next year.