Consumers around the world were using more oil before the pandemic, with developing nations and China increasing their use. Demand wasn’t growing rapidly, but it was definitely expanding and was just at 100 million barrels per day (bpd). The pandemic cut demand by 15% or so, sending the oil industry into a tailspin and leaving experts wondering how quickly demand would bounce back.
Now we’re getting at least part of the answer from the International Energy Agency (IEA)…demand won’t return very quickly.
The IEA had expected demand to bounce back this year from a low of around 85 million bpd to 93 million bpd or so. But now the agency has cut its demand forecast for the rest of the year for the second time in two months, down to 91.7 million bpd.
The IEA said in its monthly report:
“We expect the recovery in oil demand to decelerate markedly in the second half of 2020, with most of the easy gains already achieved. The economic slowdown will take months to reverse completely … in addition, there is the potential that a second wave of the virus (already visible in Europe) could cut mobility once again.”
It’s likely that a full rebound won’t take months, but years, as growth in developing nations and China must overcome the business and social reset in developed nations, where workers and consumers likely made a permanent shift to working, shopping, and eating more at home than they did just six months ago.
The sudden reduction in travel by both car and plane has improved air quality in a way that environmentalists could only dream of at the start of the year, and all it took was a worldwide pandemic that infected tens of millions, killed almost one million, and led to forced economic shutdowns.