London-based global information provider IHS Markit says the growth in global oil demand is expected to taper off, with global crude oil demand plateauing just below pre-pandemic levels.
According to the company’s new analysis, global oil demand, currently at 89% of pre-Covid-19 levels and rising, is expected to level off at between 92% to 95% of demand prior to the pandemic.
Therefore, IHS Markit expects demand growth to wane and plateau through the first quarter of 2021, with the main cause for the pause expected to be travel – especially that of air and commuting to work – remaining subdued until the spread of Covid-19 is contained and until vaccines are widely available.
“The meteoric rise of world oil demand from the lowest lows of the Covid-crash is going to come up just short of a full comeback, at least for now. For demand to fully return, travel needs to get back to normal, and that won’t happen until there is a containment of the virus and effective vaccines,” says IHS Markit VP and oil markets head Jim Burkhard.
The number of flights globally is about 30% lower than February, compared with 78% below April levels, although actual jet fuel consumption is still 50% off prior year levels since long-distance flights have not recovered to the extent of shorter ones.
Retail gasoline sales in the US are also an important signpost, says IHS Markit, with US retail gasoline sales higher than the total oil demand in any other market, except mainland China.
Oil Price Information Service by IHS tracks US retail gasoline sales each week, and notes that sales improved rapidly from May to early July after falling to 50% below prior year levels in April.
However, sales have hovered at between 17% and 18% below earlier year levels since.
The expected plateau of global crude oil demand does not mean a return to the record levels of oversupply that crashed oil prices in April, IHS says, but warns that renewed restraint by members of the Organization of the Petroleum Exporting Countries and lower US output still point to supply deficits in the second half of this year.