Appec hears of potential for demand rebound next year

Global oil demand could recover to close to 2019 levels by 2021, according to a panel discussion during the virtual Platts Asia-Pacific Petroleum Conference (Appec) 2020.

BNP Paribas' head of commodities research Harry Tchilinguirian said the bank sees global oil demand this year at an average of around 92mn b/d, compared with around 100mn b/d in 2019.

"There was very strong contraction in oil demand in [the second quarter] 2020, about 20pc relative to [the fourth quarter] 2019, we should see oil demand recover within 8pc of that level by the end of this year. In 2021 we see global oil demand to be within 1-2pc of that [fourth quarter] 2019 level by the end of the year," Tchilinguirian said.

He said that oil demand will grow in 2021 to an average of around 98mn b/d.

There will be differences in how various regions recover, Tchilinguirian said, with China recovering faster than other parts of the world. He said China could recover fully its oil demand by the end of this year, but "in some areas like [the] US or Europe, a 'return to normal' is not likely before mid 2021."

BNP Paribas' expectations for oil demand in 2021 is in line with its economic forecast, Tchilinguirian said.

"After contraction of the global economy about 4.1pc this year, we are looking for a rebound next year by 5.5pc," he said. "So effectively what we are seeing on the demand picture is that after a sharp V-shaped recovery, the remainder of the recovery will be gradual and progressive."

The biggest risks to a demand recovery will be how the Covid-19 pandemic evolves, he said. Even in China, where there has been a strong recovery in demand, any further economic recovery, particularly for manufacturing, will depend on how its export markets, like the US and Japan, reopen.

But Tchilinguirian said that BNP Paribas expects secondary Covid-19 outbreaks will be manageable and that economies are unlikely to return to the severe lockdowns of March-April. The development of a vaccine will brighten the outlook, and "oil prices may even move ahead of the fundamentals on that kind of news," he said.

Tchilinguirian's views were echoed by Russian Energy Agency head of research Denis Deryushkin. He said that under Russia's 'depressed scenario', which implies renewed US-China trade tensions and stronger secondary Covid-19 infections, there is no chance that demand could recover to pre-Covid-19 levels by the end of 2021. But Deryushkin said: "We put very low weight to this scenario," and in its more optimistic scenario Russia is in line with BNP Paribas.

"So far we think pre-Covid demand levels could be achieved by the end of next year, we think it is going in the right direction with some slowdown probably in the third quarter of this year."

By Azlin Ahmad