Driving the News

Will Demand Ever Go Back to Where It Was?

That is hard to say,” Shell CEO Ben van Beurden told Bloomberg late last week. He also said the odds of demand peaking this decade have risen.

Where it stands

Until recently the world used roughly 100 million barrels per day of oil.

  • But COVID-19 has crushed demand, with multiple analysts seeing a roughly 25%–30% decline or more at the height of the lockdowns, though recovery has begun.
  • The International Energy Agency estimated in mid-April that demand was down by 29 million bpd that month, the trough before a recovery that still brings a year-over-year drop of 9 million bpd.

What they are saying?

BNP Paribas Asset Management analyst Mark Lewis believes 2019 may have been the peak.

  • He said in a mid-April Financial Times piece that some current demand loss could be permanent, such that consumption hangs around in the 95 million to 100 million bpd range for several years before long-term decline begins.
  • Consider the structural pressures on the oil market already in evidence before coronavirus hit and then add to these the behavioural changes prompted by the pandemic, some of which seem likely to stick,” he wrote.

Meanwhile

CNN reports that while the consultancy IHS Markit sees demand coming back to 2019 levels by 2022, they have also modeled a scenario in which a second virus wave leads to demand never coming all the way back.

The Intrigue

The idea that peak demand just happened is not the mainstream view, though Bloomberg notes a “growing minority” are speculating about it.

  • But what is clear is that COVID-19 could at least hasten the arrival of the moment when it stops rising entirely.

What we are watching

How the next round of detailed projections account for the pandemic and its aftershocks.

The central scenario modeled by IEA in its 2019 long-term outlook sees growth, albeit slowing, through at least 2040, while BP’s 2019 analysis sees a plateau arriving in the 2030s.

Bearing in mind all of the chatter about the future of Crude Oil and its pricing, it is clear that Bretcrown Trading International LTD has at least twenty years to enjoy its successes and the Members of The Crude Oil Investment Club can all rejoice in the ongoing profit growth of its trading.

Neil G Van Luven

Neil G Van Luven signature

President of the Crude Oil Investment Club