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Growth in oil demand to peak in 2030s

Oil&Gas Materials 21 May 2021 13:31
Growth in oil demand to peak in 2030s

BAKU, Azerbaijan, May 21

By Leman Zeynalova – Trend:

Growth in demand for hydrocarbons, particularly oil, is expected to peak in the 2030s, and then begin a slow decline, Trend reports citing McKinsey and Company.

“Excess capacity in refining will be exposed, putting downward pressure on profits—driven by marginal pricing and, in some cases outside the growing non-OECD2 demand markets, by the economics of some refiners that seek to avoid the high cost of closing assets. The upstream cost curve will likely stay flat. While geopolitical risks will continue to be a major factor affecting supply, new sources of low-cost, shortcycle supply will reduce the amplitude and duration of price fly-ups,” said the company.

McKinsey and Company noted that the battered shale oil and gas subsector will nonetheless continue to provide supply that can be rapidly brought onstream.

“Its resilience might even improve as larger, stronger players consolidate the sector. Declining demand, driven by the energy transition, and global oversupply will make the task of OPEC and OPEC++ harder rather than easier. Global gas and LNG will have a favorable role in the energy transition, ensuring a place in the future energy mix, supported by the continual demand growth in the coming decade. However, in LNG, the expected and potential cyclical capacity expansion over the decade will add pressure and volatility to global LNG contract pricing, and hence to regional gas prices. In the long term (post-2035), gas will face the same pressures as oil with peak demand and incremental economics driving decision making.”

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Follow the author on Twitter: @Lyaman_Zeyn

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