- Russia’s Energy Minister believes crude oil demand could fully recover to pre-COVID levels by 2021
- This statement came after the head of Russia’s sovereign wealth fund said there was no point extending the new OPEC+ production cuts past July
- Novak’s comments contradict predictions by Moody’s that oil demand will never return to pre-COVID levels
Crude oil demand could recover to levels last seen before the coronavirus pandemic sometime next year, Russia’s Energy Minister Alexander Novak told German daily Handelsblatt in an interview.
“Of course, it won’t happen this year,” he said, referring to the recovery in oil demand. “We hope it will happen next year, but it could take another two or three years.”
Novak’s comments come on the heels of a statement by the head of Russia’s sovereign wealth fund, Kiril Dmitriev, who said there was no point in extending the deepest OPEC+ production cuts beyond the end of July, suggesting that the oil market should be nearer balance by then.
Oil demand has been recovering across the world as pandemic-forced national lockdowns began to be lifted and borders reopened. However, the situation is still very fragile, with little clarity as to whether demand will in fact improve to pre-crisis levels, especially given plans for a green recovery in Europe, which will be tied to lower oil consumption.
One thing, however, seems to unite forecasters: the expectation that this oil demand recovery will take a long time. One reason for this is a permanent change in consumer behavior, prompted by the pandemic, including less commuting because of permanent work-from-home options, and less international travel for fear of infection. Another reason is the economic fallout of the pandemic, with high unemployment, reducing consumers’ ability to spend. Related: Rebound In Oil Prices Helps Prop Up Midstream Sector
According to the International Energy Agency (IEA), oil demand will take over a year and a half to (potentially) return to the levels before the pandemic. This year, demand is expected to drop by 8.1 million bpd, the biggest-ever decline, the IEA said in its latest Oil Market Report for June.
OPEC expects an annual decline in demand of 6.4 million bpd for the second half of the year, after an estimated 11.9-million-bpd contraction over the first half.
According to Moody’s, oil demand may well have peaked last year and will never recover to pre-crisis levels.
By Irina Slav
More Top Reads From Oilprice.com:
Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
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