The OPEC group has slightly downgraded its expectations for a resurgence in demand next year, citing a slow recovery in the transport sector.
The demand for crude oil almost reached 100 million barrels per day (bpd) in 2019, but the COVID-19 pandemic wiped out a tenth of that, as lockdown measures affected industrial activity and limited demand for transport fuels.
Demand is expected to average about 90 million bpd over 2020, and from this point, OPEC now expects it to increase by 5.9 million bpd over 2021, which would still fall short of 2019 levels. According to OPEC:
“This is due to the uncertainty surrounding the impact of Covid-19 and the labour market on the OECD transportation fuel outlook for H1 2021. Petrochemical feedstock and industrial fuels are forecast to gain momentum on the back of improving economic activities.”
Indeed, while the demand for transport fuel is expected to remain suppressed for some time, the demand for petrochemicals – which are derived from crude oil to make various products, such as the Mobil Vactra slideway oil – is expected to grow steadily as industrial activity recovers. This applies even in European countries, which face a particularly steep challenge in returning economic output to pre-pandemic levels. A healthy recovery in China is also expected to increase demand for petrochemical feedstock, especially liquefied petroleum gas.
Even during the pandemic, OPEC says the demand for petrochemicals has helped support the demand for crude oil, with feedstock needed to make plastics for the healthcare industry and packaging for online purchases.