BAKU, Azerbaijan, Jan.5
By Leman Zeynalova – Trend:
Energy transition looks set to put pressure both on oil demand and supply in the mid-term, Trend reports with reference to Fitch Solutions.
Near-term pressures look to be building on oil producers from investors as greater disclosure and accountability for emissions become a wider part of the discussion on climate change, the company said in its latest report.
“A growing number of lenders and investors are curbing or reducing the scope of fossil fuel investment to limit climate damaging projects which could see some projects face higher lending costs or in the worst case be uninvestable due to high emissions. While we do not see a near-term impact in 2021, it may be more likely these pressures along with net zero pledges from Europe and Asia, and renewed decarbonisation vigour from the US, push the mid-term forecast more widely askew,” said the company.
Fitch Solutions expects 2021 global fuel demand to grow by 4.6mn b/d after falling by 7.1mn b/d in 2020 as the global economy continues to recover and transport and commerce return closer to historic pre-pandemic levels.
“OPEC’s actions will likely consider the surge in global fuel demand expected in 2021 and seek to ensure that all incremental demand is captured by its members. Parallel to the surge in demand is a modest increase in supply of 1.6mn b/d coming mostly from OPEC as we forecast US shale output will continue to decline well into 2021. We forecast both supply and demand to return to 2019's pre-pandemic levels in 2022 as markets find balance given OPEC+ constraints and a clear recovery picture emerging. However, the threat of renewed supply from US shale producers and wider demand downside on a weaken global economy present clear upside limits to substantially higher prices from today's levels,” reads the report.
Improving refiner margins boosts expectation for a return to balance in fuel production and higher demand following easing pandemic pressures, according to Fitch Solutions.
“Although crack spreads remain near five-year lows, 2021's numbers should trend higher given recent efforts to curb fuel production and reduce excess stocks. We anticipate that the recovery in global economic activity should support increased crude consumption from refiners as demand for transport and industry ticks higher as the year progresses with virus concerns easing following widespread vaccinations efforts. However, a delay to the global roll-out of vaccines poses a risk to the demand recovery scenario given the current
increase in lockdowns in key markets to start the year. We expect the majority of fuel demand recovery to occur in H2 2021, which is heavily geared toward lasting widespread easing of restrictions. However, this may not occur if sufficient immunity levels are not achieved during this time frame,” the company said.
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