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Coronavirus fuels uncertainty as global oil consumption dips 9% in 2020

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OPEC Photo: JOE KLAMAR/AFP/Getty Images

Global consumption of petroleum and other liquid fuels crashed by nine percent to 92.2 million barrels per day (bpd) in 2020, due to the coronavirus restrictions and lockdowns, the U.S. Energy Information Administration (EIA) has said, noting that this was the largest drop in EIA’s series in 20 years.

While it projected that the world will return to more normal consumer behaviour this year, and a continued recovery in economies is set to contribute to rising oil consumption in 2021 as the year progresses, the EIA warned that the effects of the pandemic continue to present challenges in forecasting global petroleum liquids consumption.

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Similarly, OPEC also sees oil demand growing this year from the crash in 2020. Yet, at an expected 95.9 million bpd in 2021, oil consumption would still be nearly 5 million bpd below the pre-crisis levels from 2019.

“Oil demand is not projected to fully recover from the 2020 slump,” said OPEC, which estimates 2020 demand to have crashed by 9.8 million bpd to average 90 million bpd.

Using each country’s oil production and consumption estimates from the October 2020 Short-Term Energy Outlook (STEO), the EIA reported Nigeria’s net oil export estimated earnings between January and September 2020 at $16 billion, down from $37 billion recorded in 2019.

Although the oil sector represents less than 10 percent of Nigeria’s gross domestic product (GDP), it accounts for half of the government’s revenues and over 90 percent of its foreign exchange.

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For January, a significant drop in Nigeria’s oil export has limited the increase of oil output from member countries of the Organization of Oil Exporting Countries (OPEC).

OPEC recorded oil output rise for a seventh month in January, a Reuters survey found, after the group and allies agreed to ease record supply curbs further, but an involuntary drop in Nigerian exports limited the increase.

Among the countries showing lower output, the biggest drop was in Nigeria after force majeure was declared on exports of Qua Iboe, one of the country’s largest production streams.

Operator of the facility Exxon Mobil said on January 22 that the force majeure has been lifted.

The 13-member OPEC pumped 25.75 million barrels per day (bpd) in January, the survey found, up 160,000 bpd from December, and a further increase from a three-decade low reached in June.

EIA expected in its January Short-Term Energy Outlook that global liquid fuels consumption will grow by 5.6 million bpd this year, or by six percent compared to 2020, and rise by another 3.3 million bpd in 2022.

It noted that the United States will contribute with a 1.4 million bpd consumption increase to the growth in 2021, the EIA forecasts.

Oil consumption will rise this year thanks to both economic growth and a return to more normal travel patterns by the middle of the year, which will also have a small effect on oil consumption growth in 2022.

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Despite the expected growth in global oil consumption in 2021, EIA still forecasts it to average below pre-pandemic levels—at 97.8 million bpd, it would be 3 percent less than the 2019 level.

The International Energy Agency (IEA), for its part, cut its estimate for oil demand growth for this year by 300,000 bpd to 5.5 million bpd. The IEA expects oil demand to average 96.6 million bpd in 2021, after crashing by an all-time high of 8.8 million bpd in 2020, under the weight of the COVID-19 pandemic.

OPEC+, which groups OPEC and other producers led by Russia, agreed to pump more from January 1, and returns to output restraint again from February amid fears of a slow demand recovery. The latest supply pact has helped oil to an 11-month high above $57 a barrel this year.

“The increase is natural with the higher production ceiling from January,” an OPEC delegate said.

In January, the biggest supply increases came from Saudi Arabia and Iraq, the group’s top two producers, reflecting their higher quotas. Iraq is still making almost all of its pledged OPEC+ cuts, having struggled to do so in the past.

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