Thursday, 28 October, 2021
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Global oil demand seen reaching pre-pandemic levels by early 2022

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

SINGAPORE: 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.

While a persistent rise in Covid-19 infections in several markets has hurt recovery in demand for some refined products such as jet fuel, consumption trends of petrol and diesel indicate higher growth, the industry leaders said, report agencies.

They were speaking at the Platts APPEC 2021 conference that is being held in a hybrid format this year, including both in-person and virtual participants.

“We saw refining margins rebound as demand rebounded . . . But overall for the world, there’s still a lot of unutilised capacity; and a lot of capacity has been taken offstream,” said Eugene Leong, president of BP Singapore and CEO of BP’s trading & shipping arm of Asia-Pacific and the Middle East.

“The spare (refining) capacity is probably going to act as a little bit of a cap on margins,” he said in a pre-recorded speech for the conference. “This year alone we’ve seen some mega refining (and) petrochemical complexes start up, so I think that’s going to be challenging for refining.”

In China, new mega refiner Shenghong Petrochemical is set to start trial operations soon, while Zhejiang Petrochemical completed two new crude units earlier this year.

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

However, recovering demand is expected to boost profits for refiners and create more room for returning or new production.

Brent crude futures have jumped more than 50 per cent 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+.

US oil and gas producer Hess Corp expects global demand to climb to pre-pandemic levels of 100 million bpd by the end of this year or early 2022, its president, Greg Hill, said.

The International Energy Agency (IEA) has also forecast a robust rebound from the fourth quarter, citing “strong pent-up demand and continued progress in vaccination programmes”.

It expects global oil demand to average 96.1 million bpd in 2021 and 99.4 million bpd in 2022, versus 90.9 million bpd in 2020.