Global oil demand growth—the very thing on which the entire state of the oil industry hinges—is expected to taper off, IHS Markit has said in its latest forecast.
The forecast joins the growing chorus of pessimistic forecasts shining a light on the future of global oil demand growth, which has been pushed down due to the Covid-19 pandemic—specifically the lockdowns and depressed travel activity.
Global oil demand is currently sitting at 89% of pre-pandemic levels, IHS Markit said. It is then expected to rise and level off at between 92% and 95% of the demand pre-pandemic.
Oil demand growth, therefore, will wane and plateau through Q1 2020 as fewer people are commuting to work, and as air travel slumps considerably amid remaining travel restrictions and people’s subdued appetite for air travel—particularly international air travel.
According to IHS Markit, the current appetite for air travel will remain depressed until such a time as there is a vaccine, or until Covid-19 has been tamped down.
Oil demand hinges largely on jet fuel and U.S. gasoline demand—a bellwether for global gasoline demand. And so far in 2020, global jet fuel demand and gasoline have rebounded from April, but global jet fuel demand is still off 50% year to date. U.S. gasoline demand is down by a lesser amount, but still significant, at around 20%, despite its significant rebound from April lows, at the height of the U.S. lockdowns.
The forecast is borne out by the current data coming out of China, where jet fuel exports hit their lowest point since November 2011. So far, from January to July, China’s jet fuel exports were down 18% from the same period a year ago. And the monthly trend isn’t great either, with July down 77% from a year earlier, and 60% down from June.
By Julianne Geiger for Oilprice.com