Opec has painted a promising post-Covid-19 growth outlook for oil, saying global demand is expected to rise to almost 104 million barrels per day by 2025, up by 4 million bpd from last year — but trillions of dollars of investment are needed.
Releasing its closely watched annual World Oil Outlook on Thursday, Opec forecast that consumption will keep rising until around 2040, when it will plateau at 109.3 million bpd —some 10% above 2019 when world oil demand stood at 99.7 million bpd.
Crude will continue to remain the primary fuel through to 2045, with a share of 27% in the global energy mix.
$12.6 trillion investment needed
Opec secretary general Mohammad Barkindo said the global oil sector will need cumulative investment of $12.6 trillion in the upstream, midstream and downstream through to 2045.
The Covid-19 pandemic had resulted in the sharpest downturn in energy and oil demand in living memory, but demand is expected to rebound as countries around the world accelerate economic activities.
"Despite the large drop in 2020, global primary energy demand is forecast to continue growing in the medium and long term, increasing by a significant 25% in the period to 2045," Barkindo said while launching the report.
“Global oil demand will grow at relatively healthy rates during the first part of the forecast period before demand plateaus during the second half,” said the report, which looks at the 2019-2045 timespan.
Demand to sit below previous projections
However, future demand will likely remain persistently below past projections because of lingering effects of the Covid-19-related shutdowns and their impact on the global economy and consumer behaviour.
While oil use in road transportation and industry will rebound as economies recover from the pandemic, Opec voiced concern that future growth may be negatively impacted by factors such a post-pandemic shift to working from home and teleconferencing over commuting.
Efficiency improvements and a shift to electric cars will also have an impact on oil consumption.
“The year 2020 will be remembered primarily for the omnipresence, as well as unprecedented scale and reach, of the Covid-19 pandemic.
"From an energy point of view, the lockdown-induced economic recession has resulted in the sharpest downturn in energy and oil demand in living memory,” the report said.
Opec output set to drop
Opec forecast it will pump more in 2021 than this year’s expected 30.7 million bpd, but rising US supplies and other outside producers means that Opec output in 2025 will likely be 33.2 million bpd, below 2019’s level.
Longer term, its reference case is for oil demand to reach 109.3 million bpd in 2040 and decline slightly to 109.1 million bpd by 2045.
Opec said “the big question hanging over energy and oil markets” was to what extent there would be a longer-term impact of the coronavirus on consumer behaviour and energy consumption.
Crude is forecast to remain the largest contributor to the energy mix through to 2045, accounting for more than 27%, followed by gas with a share of about 25% and coal accounting for nearly 20%.
The share of solar, wind and geothermal energy is expected to grow by 6.6% per year on average through to 2045, faster than any other energy source.
These renewable energy sources were expected to represent 8.7% of the fuel share in 2045, up from 2.1% in 2019, Opec said.