LONDON (ICIS) – Global demand for crude oil in petrochemicals will remain strong in 2021 but slow significantly in 2022, the International Energy Agency (IEA) said Friday.
In any case, supply must match demand, as many crude oil producers will be able to increase their production in a relatively short period of time.
According to the IEA, by the end of 2022, the demand for crude oil will exceed the level before the 2019 pandemic; but all supply growth is expected to come from non-OPEC countries, led by the US and Canada.
The IEA estimates the Saudi-led crude oil cartel will be producing about 2 million barrels per day less by the end of 2022 than it was before the pandemic.
The fortunes of the global petrochemical industry amid strong growth in demand for all types of packaging and medical devices will soon end as the pandemic is under control and consumers are spending more on experiences than on goods.
“Petrochemical demand has been relatively spared the 2020 COVID crisis as the need for medical equipment and packaging has been offset.[s] falling demand in the manufacturing sector [in the initial stages of the
pandemic]”, – said the IEA.
“Demand should remain strong in 2021, but growth is expected to slow in 2022. The US and China are leading the expansion of the petrochemical industry. ”
The slowdown in petrochemical activity suggests that global demand for naphtha, a key petrochemical feedstock, will not change in 2022.
Q4 2022: REACHING PRE-PANDEMIC LEVELS
The IEA expects demand for crude oil to rise 5.4 million barrels per day in 2021 to 96.39 million barrels per day.
Demand fell to a historic 8.6 million barrels per day in 2020, ending the year at 91.03 million barrels per day.
In 2022, demand will grow by another 3.1 million barrels per day, an average of 99.5 million barrels per day. The IEA said this will happen in the fourth quarter of 2022, when demand hits the pre-pandemic level of 100.6 million barrels per day.
Demand in 2019, the last full year before the pandemic, stood at 99.67 million barrels per day.
Aviation is expected to recover in 2022 after being hit by travel restrictions caused by the pandemic, but that recovery will depend on the global global response to the pandemic, the IEA added.
“By the end of 2022 [overall] demand must exceed pre-COVID levels. The recovery will be uneven, not only across regions, but also across sectors and products. While the end of the pandemic is nearing in advanced economies, the slow spread of the vaccine could still jeopardize recovery in non-OECD countries, ”the IEA said.
“The aviation sector will be the slowest to recover as some travel restrictions are likely to remain in place until the pandemic is fully brought under control. Gasoline demand is expected to lag behind pre-COVID levels as continued teleworking practices and a growing share of electric and more efficient vehicles offset increased mobility. ”
According to the IEA, the increase in demand will be accompanied by an increase in supply, which will support producers outside of OPEC. The United States, Canada, Brazil or Norway are expected to be among the producers that will benefit the most.
However, OPEC +, a group led by Saudi Arabia and Russia, representing non-cartel countries but allies, will need to “open the taps” to ensure a good supply of the world.
OPEC + has made a voluntary production cut to balance the market after a sharp rise in reserves in 2020.
“Satisfying the expected growth in demand is unlikely to be a problem … Even after increasing oil production by about 2 million barrels per day between May and July, OPEC + will have 6.9 million barrels per day of effective reserve capacity. If sanctions against Iran are lifted, an additional 1.4 million barrels per day could be delivered to the market in a relatively short time, ”the IEA said.
The US is reportedly considering lifting sanctions on Iran as part of an updated nuclear deal that will allow the Middle East oil company to return to the global market.
“For non-alliance producers, production growth should accelerate from 700,000 barrels per day in 2021 to 1.6 million barrels per day next year … well above the 2019 level. On the contrary, even if OPEC + producers fill the gap created by the growth in demand, the block’s production will still be more than 2 million barrels per day below the 2019 average. ”