BAKU, Azerbaijan, Oct.13
By Leman Zeynalova – Trend:
The era of global oil demand growth will come to an end in the next decade said the Executive Director of the International Energy Agency (IEA), Trend reports.
“But without a large shift in government policies, there is no sign of a rapid decline. Based on today’s policy settings, a global economic rebound would soon push oil demand back to pre-crisis levels,” he said.
In oil markets, the recovery in demand in the Stated Policies Scenario (STEPS) requires that upstream investment picks up from the low point in 2020, underpinned by a rise in the oil price to $75/barrel by 2030.
“However, it is not clear whether this investment will come in time and, if it does come, where it will come from. The US tight oil sector has been the main engine of supply growth in recent years, but it was fuelled by easy credit that has now dried up. Meanwhile conventional producers are also feeling huge strains from the collapse in prices and revenues. Inventories are high and markets are well supplied in the near term, but the prospects for continued ample supply to meet the projected demand rebound in STEPS over the period to 2030 should not be taken for granted,” the IEA said in its World Energy Outlook 2020.
In the STEPS, US tight oil output returns to 2019 levels by 2022, while the prospects for conventional producers also depend on their resilience to the effects of the crisis. Low cost producer countries with larger financial buffers, such as Saudi Arabia, Russia, Kuwait and the United Arab Emirates, are better placed to weather the storm. Other producers, such as Iraq, Angola and Nigeria, face acute fiscal difficulties and struggle in the STEPS to mobilise upstream investment.
“The effects of the Covid-19 pandemic have put a strain on fuel markets and exacerbated many of the longer term challenges facing fuel suppliers. As demand has declined, a significant excess supply capacity has appeared in all markets, with little certainty on how quickly this overhang will be absorbed. Investment budgets are strained, prices are lower, and investors are looking at the fossil fuel sector with increased scepticism, driven by concerns about financial returns and uncertainty around demand, and also by doubts about business models against a backdrop of growing social and environmental pressures in many countries,” said the IEA.
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