Abu Dhabi: Oil demand back to pre-COVID 19 levels will not happen overnight and will take a significant amount of time according to the head of International Energy Agency (IEA), who said that 2020 will be a bad year for the oil industry.
“I don’t think [the recovery] will happen within one year, it may take significantly longer [and] depend on a few things… One thing is clear, we will need oil in years to come, but the amount of oil we will need may well be not at the same level we had before the coronavirus,” Dr Fatih Birol said during an online discussion hosted by the UAE based Gulf Intelligence group.
“The numbers are still very worrying… We still have a huge amount of surplus, plus a lot of floating oil around the world, so therefore one needs to be very careful,” he added, highlighting how markets remained extremely volatile.
Birol acknowledged that there were some good signs recently with demand slightly picking up as lockdown measures started to ease, he did however caution that these positives were minor compared to the larger demand collapse.
“We have a demand collapse now, and knowing that two thirds of global oil consumption goes to the transportation sector with cars, buses and jets, I don’t see a reason to be cheerful to see some pictures from the streets of Beijing [showing more traffic] or one or two airlines [getting back to business].
“I still consider 2020 to be a bad year for the oil industry, hopefully 2021 can be a better year,” he added.
“We said last April [demand would fall by] slightly more than 9 million bpd, we are revising the numbers on the basis of new data on the economic side and the lockdown [easing] policy side, and we will come up with a new number on Thursday. But, the numbers we will have will still be on the worrying side for the oil industry,” he said.
Commenting on the production cuts led by Saudi Arabia, Birol said that while the Opec+ cuts were positive, more action could still be required down the road.
“I have to commend the Saudi government for another announcement they made on additional cuts [of 1 million bpd] along with two other Gulf countries; Kuwait and UAE, they are welcome to help balance the markets.
“We don’t know what the situation will look like in the next few months, but from the current picture if nothing changes I believe there may be the need for further efforts coming from the producing countries,” he added