Optimistic outlook for oil demand

According to data from OPEC and the International Energy Agency as of mid-July, oil demand forecasts are rising. Will the optimistic view be proven correct? We have learned how the market has changed or fluctuated wildly, whether in history or in the recent past. These forecasts reflect a certain degree of consensus and are encouraging for manufacturers.

OPEC’s monthly report on July 15 predicts that next year’s global oil demand will reach nearly 100 million barrels per day, which is similar to the level before the new crown pandemic in 2019. Oil demand growth in 2021 will remain unchanged at 5.95 million barrels per day. About 6.6%.

Driven by demand growth in the United States, China and India, it is expected that it will increase by 3.4% to 99.86 million barrels per day in 2022, and will average more than 100 million barrels per day in the second half of this year.

"There are solid expectations for global economic growth in 2022," OPEC said that these measures include improved control of the new coronavirus, especially in emerging and developing countries. It is predicted that oil demand in these countries will reach pre-pandemic levels in 2022. "If the actual recovery is in line with these forecasts, OPEC can further bring back its record supply reduction levels in 2020.

The International Energy Agency pointed out that the growth in global electricity demand is expected to stimulate demand for fossil fuels including oil, coal and natural gas. After a 1% drop in 2020, power demand in the Asia-Pacific region will increase by 5% around 2021 and 4% in 2022. China is the world's largest electricity consumer and tops the list, which will account for more than 50% of the growth in 2022. India, the third largest electricity consumer, will account for 9% of global electricity growth in 2022.

Renewable energy is expected to meet about half of the expected increase in global demand in 2021 and 2022. The International Energy Agency wrote, “Renewable energy power generation continues to grow strongly, but cannot keep up with increasing demand. After an increase of 7% in 2020, renewable energy power generation is expected to increase by 8% in 2021 and 6 in 2022. %above."

Electricity based on fossil fuels will account for 45% and 40% of new demand in 2021 and 2022, respectively. After a 4.6% decline in 2020, coal-fired power generation will increase by nearly 5% in 2021, exceeding the level before the new crown pandemic. By 2022, it will increase by another 3%, and may reach the highest level in history. Natural gas power generation lags behind coal because it is used less in the Asia-Pacific region and competes with renewable energy sources in the United States and Europe. Global growth is expected to be 1% in 2021, and after a 2% decline in 2020, it will grow by nearly 2% in 2022.

The US Energy Information Administration released a global financial assessment report last month, assessing 91 oil and gas companies in the first quarter of 2021, most of which are headquartered in the United States. The report pointed out that these companies are implementing plans announced last year to reduce capital expenditures for debt repayment. Capital expenditure in the first quarter of 2021 was US$48 billion, 28% lower than the first quarter of 2020 and the second lowest quarter since 2016. The total operating cash in the first quarter of this year was US$79 billion, 19% higher than the first quarter of 2020; about 76% of companies have positive free cash flow. Overall, the company reduced its debt by $16 billion in the first quarter of 2021, and its long-term debt-to-equity ratio fell to 54%.