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APPEC-Global oil demand seen reaching pre-pandemic levels by early 2022 By Reuters


© Reuters. FILEPHOTO: An Indian worker pumps petrol into a car at a Mumbai fuel station, on May 21, 2018. REUTERS/Francis Mascarenhas/File Photo

By Koustav Samanta, Roslan Khasawneh and Florence Tan

SINGAPORE (Reuters) – Global fuel demand is expected to reach pre-pandemic levels by early next year as the economy shrugs off pandemic woes, but spare refining capacity is likely to weigh on outlook, oil producers and traders said on Monday.

The industry leaders stated that while there have been some market declines in the demand for jet fuel due to persistent COVID-19 infections, overall, trends in petrol and diesel usage indicate higher growth.

The Platts APPEC 2021 conference, which is held this year in a hybrid format with both virtual and in-person participants, was their topic.

We saw refiner margins rise as the demand for oil rebounded. But overall for the world, there’s still a lot of unutilised capacity and a lot of capacity has been taken off stream,” said Eugene Leong, president of BP (NYSE:) Singapore and CEO of BP’s trading & shipping arm of Asia Pacific and the Middle East.

In a recorded speech, he stated that “reserve (refining), capacity will probably act as some kind of a cap to margins.”

This year we have seen several mega refineries (and) petrochemical clusters come up. I feel that this will be a challenging year for refining.

China’s new mega refiner Shenghong Petrochemical will soon begin trial operations. Zhejiang Petrochemical also completed two crude units this year.

Malaysia’s Petronas also hopes to restart operations at its 300,000 barrels-per-day refinery-petrochemical complex with Saudi Aramco (SE:) by year end, said Arif Mahmood, Petronas’ executive vice president and CEO of downstream.

The recovery in demand should boost profit margins for refiners, and allow for more production.

GLOBAL DEMAND RECOVERY

futures have jumped more than 50% this year to their highest since October 2018, helped by a recovery in fuel demand as well as tighter supplies from the Organization of the Petroleum Exporting Countries and its allies including Russia, a group known as OPEC+. [O/R]

U.S. oil and gas producer Hess Corp (NYSE:) expects global demand to climb to pre-pandemic levels of 100 million barrels per day (bpd) by the end of this year or early 2022, its president, Greg Hill, said.

According to the International Energy Agency (IEA), a strong rebound is expected from the fourth quarter. This was due to “strong pent up demand” and progress made in vaccine programmes.

The IEA expects that global oil demand will average 96.1million bpd by 2021, and 99.4million bpd by 2022. This compares to 90.9 million BPD in 2020. The OPEC anticipates that demand will reach 99.70million barrels per hour in the fourth quarter 2021.

Alois Virag, chief executive officer of Nayara Energy, said that India’s private refiner hopes to run its 400,000-barrel per day (bpd), refinery to close to 100 percent capacity by 2021, as the fuel demand increases.

He said that India’s fuel consumption is expected to increase by between 9% and 11% due to its “steered toward higher growth” economy following the end of the COVID-19 second wave.

Petronas’ Arif said that while we are cautious about refining petroleum products, “we remain cautious” and added that travel restrictions continue to impact on the recovery of aviation fuel demand.

Arif stated that “we’ll see recovery possibly towards the end this year or early next year” and added “there’s an oversupply in refining capacities.”



Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.