Investors see peak demand happening much further into the future
The recovery in economies this year has led to a robust rebound in demand for oil, refuting some projections since the start of the pandemic in 2020 that the world has already experienced a peak in demand for oil.
Despite fears over new variants, such as Delta and lately Omicron, global demand for oil is on track to reach pre-pandemic levels in a matter of months and continue to rise in the years to come. Peak oil demand is not in the cards for the foreseeable future, analysts say.
Oil investors interviewed by Bloomberg Intelligence in November also significantly recalibrated their expectations for peak oil demand over the past two years.
Two and a half years ago, a fifth of oil investor clients surveyed by Bloomberg Intelligence said demand for oil would peak by February 2021, notes Nathaniel Bullard, content director at BloombergNEF. In June 2019, another third of oil investors believed that we would see a peak in global oil demand by 2025. In previous surveys, most investors expected a peak in oil demand by 2030 .
But the latest survey last month showed a marked difference in the overall timing of peak oil demand compared to the previous four surveys.
Currently, only 2% of oil investors believe that demand for oil will peak by 2025, and less than 40% will see this peak before 2030. A third of investors expect demand for oil to peak between 2025 and 2030 , but another third believe the peak would be after 2030, at some point between 2030 and 2035.
The mid-1930s is currently OPEC’s timetable for peak oil demand. Global demand for oil is expected to continue to grow in the mid-1930s to 108 million barrels per day (bpj), after which it is expected to peak until 2045, OPEC said in its 2021 World Oil Outlook (WOO) earlier this year. OPEC sees demand for oil grow “strongly” in the short and medium term before leveling off in the long term.
Despite the expected long-term demand leveling off, oil will continue to be the fuel of most of it of the global energy mix by 2045, then meeting 28% of energy demand, OPEC Secretary General Mohammad Barkindo said last month, stressing the need to invest in oil supplies to meet the demand. consumption.
Demand is set to grow as the world continues to run on fossil fuels, which account for around 85% of total global energy demand.
The most significant drop in demand for oil is likely to come from electric vehicles (EVs), which in some countries have started to eat away at oil demand for road transport.
However, it will take years for the global demand for road fuel to be seriously affected by the electrification of transport.
According to BloombergNEF Electric Vehicle Outlook 2021, electric vehicles of all types are already replacing well over a million barrels of oil demand per day. In its Economic Transition Scenario, BloombergNEF sees aggregate road transportation oil demand peak in 2027, then decline steadily from there.
Electric vehicles have the potential to displace some of the demand for oil, but the world as a whole is not there yet, other analysts say.
“When the impact of the pandemic on global oil markets was at its peak, it was said that we had already passed the point of ‘peak demand’ and that consumption would never be higher than in 2019. Wood Mackenzie analysts did not. believed it at the time, and their skepticism is justified, ”Ed Crooks, vice president, Americas at Wood Mackenzie, wrote in October.
“Peak demand will only come through long-term structural changes, most immediately in light road transport, and these take time. There are signs that surging electric vehicle sales in Europe may start to reduce demand for on-road fuel in that country, but most of the world is not there yet. As the impact of the pandemic continues to fade, this will likely become more and more evident, ”noted Crooks.
By Tsvetana Paraskova for OilUSD
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