Dec 15, 2020 - Energy & Environment

Oil forecast highlights the long road back from COVID-19

Illustration of a barrel of oil wearing a face mask

Illustration: Sarah Grillo/Axios

The latest IEA analysis of oil markets provides a window into how long it will take for life to return to normal despite the arrival of COVID-19 vaccines.

Driving the news: This morning the agency slightly trimmed its 2021 oil demand outlook even further.

  • Its monthly report now sees oil consumption next year climbing 5.7 million barrels per day compared to 2020 levels.
  • That's a lot! But consider that demand plunged by an unprecedented 8.8 million barrels per day this year, per their latest data.

The big picture: The biggest reason 2021 demand will still be way lower than 2019 has to do with air travel remaining way below pre-pandemic levels. But more broadly, the year-to-year comparison doesn't capture the slow ramp up.

Why it matters: Oil supply and demand data are always closely watched by traders, but in the pandemic era, they're also a proxy for the status of restrictions and the return to old ways — or lack thereof.

What they're saying: "[I]t will be several months before we reach a critical mass of vaccinated, economically active people and thus see an impact on oil demand," the agency said.Here's more on why it expects 2021 oil consumption to recover just two-thirds of the amount lost in 2020:

  • Growth in road fuel will be strong and almost reach 2019 levels. Jet fuel comes back more slowly as restrictions remain until vaccines are widely available.
  • Also, older people will remain cautious, while the economic hit means less money to spend on air travel overall, and business travel will be hit by cost-cutting and online meetings.
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