A third wave of pandemic and lockdowns threatens to wreak havoc on global energy demand, but successful vaccinations and economic stimulus packages offer hope for the best. At the same time, the demand for oil will continue to lag far behind the pre-crisis level, while gas consumption will grow to another record. Such forecasts are contained in the report of the World Energy Agency (IEA) Global Energy Review 2021. Details – in the material “Izvestia”.
The epidemic and measures to contain it hit the oil market with an unprecedented blow. Consumption at the end of last year decreased by 8.5 million barrels per day, or 8.8% – a record both in absolute and relative terms. The transport sector played a key role: demand for kerosene and aviation gasoline fell by 3.5 million barrels per day, or 41% compared to 2019. This turned out to be quite adequate to the decline in air passenger traffic (66%). Gasoline and gas oil demand fell by 8% and 6%, respectively. Some growth was observed in the naphtha and ethane sector, which was associated with an increase in production in the petrochemical industry (including due to the colossal demand for masks and other personal hygiene products), but all this could not compensate for the collapse in other industries.
This year, according to the IEA forecast, oil consumption is expected to recover. However, only in comparison with the crisis of 2020. The total demand for black gold should grow by 5.4 million barrels (6%). In relation to 2019, consumption will be 3.2% less. The third wave of coronavirus, observed in many countries, plays an important role here, although the scope and severity of quarantine measures in the first half of 2021 is noticeably smaller than in the same period of 2020. In the second half of the year, however, demand will grow very rapidly, which will contribute to the presumably successful vaccination and, accordingly, an increase in the number of trips. And yet, even in the fourth quarter, oil consumption will only approach, but will not reach the figure of the year before last (1.4 million barrels less). These indicators will equalize only after deducting the demand for international aviation.
Photo: Izvestia / Alexander Kazakov
China is the only country to increase oil consumption in 2020. Moreover, in 2021 it will grow in the second economy of the world at a completely reactive pace – by 9%. If not for this growth in China, oil workers around the world would not have been able to sell a million barrels per day this year. Oil demand will be lower than in 2019 in the United States (by 800 thousand barrels per day) and the European Union (400 thousand barrels). In India, the figures will return to the level of the year before.
A much more rosy situation will be observed in the natural gas sector. In 2020, the consumption of this type of fuel fell by 75 billion cubic meters (1.9%), thus, the decline was much more modest in comparison with oil. This is not surprising: the sectors that consume gas were relatively weakly affected by the epidemic (for example, housing needs to be heated regardless of the epidemiological situation). In addition, the growth in demand for electricity was of great importance, for which gas is today one of the most important and at the same time rapidly growing sources.
In Asia, gas demand has increased almost everywhere: in China, India, South Korea and many other countries. Interestingly, the decline was recorded in the producing regions – for example, in Russia and the Middle East.
Photo: Izvestia / Konstantin Kokoshkin
In 2021, the IEA expects an increase in demand for natural gas by 3.2%, which will be more than enough to cover the fall of last year – the growth to the record level of consumption in 2019 will be 1.3%. While economic recovery plays a key role here (and demand will be stronger the sooner countries shake off the effects of the crisis), the weather is also of great importance, namely the cold winter and spring, which this year stood out on both sides of the Atlantic Ocean.
Among individual countries, China is again leading, where demand will immediately increase by 14%. This growth is due, among other things, to the PRC’s desire to comply with the standards for combating climate warming, and natural gas can significantly reduce CO2 emissions compared to coal, on which most of the Chinese energy is now based.
However, it turned out that it is too early to bury coal on a global scale. In 2021, global demand will grow, according to the IEA, by 4.5%, which will be enough to offset the 4% drop in 2020, which was the strongest since the Second World War. Agency experts believe that this will be possible due to the strong increase in prices for natural gas. This process is already being observed: in the United States in February, prices reached $ 5.35 per million British thermal units (approximately $ 190 per thousand cubic meters), which is the highest level since 2014. Since then, prices have dropped slightly, but still remain much higher than a year ago, and in Asia and Europe they will be even higher. While coal use will continue to decline in the United States and virtually disappear as a fuel in the European Union, Asia will provide enough growth to offset declines in consumption elsewhere. Thus, the strategy of displacing coal globally to reduce carbon emissions is not working very well yet.
Photo: REUTERS / David Gray
By the way, the growing economy will also raise the demand for products from renewable energy sources. In 2020, this sector was the only one that did not experience a decline (+ 3% growth), and in 2021 another 8% rise is expected. The total volume of electricity output from renewable energy sources should be 8.3 thousand terawatt-hours. More than half of this increase will again be provided by China, becoming the very wave that lifts all boats in different sectors of the fuel and energy complex. From specific sources, the fastest rise will be in the wind energy sector, where it will reach 17%.
In general, the IEA’s forecast for this year is positive, the post-crisis boom should increase the consumption of all types of energy. This should have a positive effect on oil prices, which, according to various forecasts, will rise to $ 55-65 per barrel – a strong figure from the times of 2017-2019. Of course, the cancellation of the OPEC + agreements could seriously adjust prices, since the world can still produce much more than the global economy is capable of “digesting”.
As for the more distant prospects, everything is not so simple here. For example, Wood Mackenzie analysts this week predicted that from 2023 a permanent decline in oil demand will begin, which will lead to the fact that by 2030 Brent will cost $ 37-42 per barrel, and by 2050 – about $ 10 per barrel. … True, the condition for this is the exact implementation of the Paris agreements on climate change.