Oil demand is expected to take two to four years to return to 2019 levels, depending on the duration of lockdowns and the pace of GDP recovery, forecasts by McKinsey and Company, a leading management consultancy firm, shows.
“Based on our Global Energy Perspective reference-case demand insights, current OPEC+ intervention will be sufficient to help balance the market in 2021, with prices remaining at a sustained level of $50 to $55/bbl through to 2025,” the analysts said in a report.
According to the Energy Information Administration (EIA), total oil production averaged more than 100.61 million barrels per day (b/d) in 2019.
OPEC said it expected global oil demand in 2021 to increase by 5.9 million barrels per day year over year to average 95.9 million bpd.
The report said that if GDP growth recovers faster than expected, the world may see a near-term price increase at more than $55/bbl.
However, if demand recovers slower than expected or if OPEC+ stops cutting output, prices could be depressed or highly volatile for the next three to four years.
Crude oil demand has partially recovered since April 2020 but still ended the year approximately 9 million barrels per day (MMb/d) below the 2019 level, with continued COVID-19-related lockdown measures in January 2021 keeping it around 6 MMb/d lower than January 2019.
Supply remained robust until April 2020 and then dropped by 13 to 14 MMb/d in May, driven by OPEC+1 cuts and shut-ins (that have mostly returned to the market), thus showing the willingness of OPEC+ to continue interventions.
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