BAKU, Azerbaijan, July 29
By Leman Zeynalova – Trend:
Oil demand at present is damaged and will continue to be constrained at least until the end of 2020, first half 2021, Cyril Widdershoven, a Middle East geopolitical specialist and energy analyst, a partner at Dutch risk consultancy VEROCY and Global Head Strategy Risk at Berry Commodities told Trend.
He pointed out that the latter is not caused by fundamental changes, but mainly at present due to the negative impact of COVID, its 2nd wave of, and still ongoing lockdowns and lack of opening options for airplanes etc.
“We also need to assess more the total negative economic outfall of the lockdowns and COVID-issues. At present, main effects are still hidden as national financial support programs are keeping people at work or companies afloat. This however will change dramatically in autumn, as most financial injections are closed down and companies will have to stay on their own feet. These factors also will have negative impact on demand from China, as the latter is sailing on waters softened currently by support programs in OECD countries. Revamp of economies and economic growth is not at all yet there, could be even becoming worst first,” said the analyst.
Widdershoven went on to add that demand is also being constrained by the fact that there is a severe high level of crude oil and petroleum products in storage.
“These will be used first, especially if prices in market are higher than the costs of the volumes in storage when bought during COVID. Demand however will be not hitting a ceiling yet, as overall assessments, which I am supporting, shows that demand will grow even higher than 2019, if economic growth is back in town again,” said the expert.
Widdershoven noted that OPEC’s negative predictions could be too negative, as with normal economic growth, demand levels in future still can hit 110-120 million bpd, which means a total increase of 20 million bpd in the coming decade or so.
“The real issue that people are not talking about is that maybe we will not be able to produce that amount of oil per day, not because there is not enough reserves, but due to a lack of investments the last years and normal decline of production of existing fields. We have been missing around $700 billion to $1 trilion in exploration and production investments the last years. This brings production levels in future down. A possible supply crunch could even already happen in 2021 if economy growth faster than supply of oil,” he said.
He noted that peak demand due to renewables and batteries/EVs, not in this decade, total amount of vehicles EV or hybrid is still way beyond expectations.
“At same time, costs of EVs is too high, most new Emerging markets customers are not able to buy them, will be looking at conventional transport options. Economic growth also will need more petrochemicals and fertilizers, while demand for energy/power is also expected. Without real trillions of investments in electricity grids worldwide renewables are not making a real dent in demand of Emerging regions, such as India, Africa and other places.”
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