Oil demand to remain below levels seen in 2019 until 2022

Oil&Gas Materials 18 August 2020 10:16 (UTC +04:00)
Oil demand to remain below levels seen in 2019 until 2022

BAKU, Azerbaijan, Aug.18

By Leman Zeynalova – Trend:

Oil demand will remain below the levels seen in 2019 until 2022, Trend reports citing Fitch Solutions.

“From where we are currently in August, the outlook is strongly bullish. High frequency data suggest that global consumption remains around 10mn b/d (or 10 percent) lower than pre-pandemic levels. As containment measures are eased and economic activity picks up, demand will normalize. That said, normalization will take time, as second wave outbreaks arise and social distancing behaviors prove sticky in some markets. Our data indicate that demand will remain below the levels seen in 2019 until 2022,” Fitch Solutions said in a report.

Moreover, a portion of demand lost to Covid-19 has been permanently destroyed, said the company.

“In large part this reflects the effects of the virus in exacerbating pre-existing macroeconomic weakness in key emerging markets and accelerating the trend towards deglobalization and a slower rate of growth in global real GDP,” reads the report.

Fitch Solutions said that the pandemic has posed unprecedented challenges to the global oil and gas sector through the scale and severity of the demand drop it has wrought.

“Currently, the core concern of companies is to weather the storm as best they can, through a sharp pullback in capex, corporate cost-cutting measures and a reduction of shareholder distributions. In most cases, this will not prove sufficient to offset the revenue loss in full and continued access to capital – issuing new debt or securing additional credit lines – will be crucial for many companies to persevere adequate liquidity and avoid potential bankruptcy. While the reaction of companies has been broadly consistent with the actions taken during previous downturns, the pandemic has brought extra complications, in the form of operational and supply chain disruptions,” reads the report.

Fitch Solutions does not believe that strategies in the sector have been meaningfully altered by Covid-19.

“However, we believe that the pandemic has shed greater light on the risks arising from demand destruction and that strategic shifts in the sector will occur more rapidly as response. All companies face the challenge of the low carbon economy and each company will need to tailor its response to its own existing asset base, competitive strengths and operating environment,” reads the report.


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