Oil firm Equinor on Tuesday said it expects global oil demand to peak by around 2027-2028, two-free years earlier than the company previously saw, as a result of the COVID-19 pandemic.
There is no agreement on when oil demand could peak, but expectations weigh on oil companies’ plans to explore for and develop new resources.
Equinor said in its annual energy outlook “Earlier assumptions for peak oil demand to happen around 2030 may be challenged,”.
Equinor sees oil demand returning to the pre-pandemic level of around 100 million bpd by around 2025, and falling to 88 million bpd in 2050, under its central scenario, dubbed Reform.
A year ago, it saw demand peaking just before 2030 at 105 million barrels per day (bpd), mainly due to electric cars denting demand for fossil fuels, and declining to 93 million bpd by 2050, under the same scenario.
The company said supply constrains due to underinvestment could also impact the demand growth in the future after oil firms cut investments by about 30% this year.
Equinor added that “The consequence may be that billions of barrels of oil that were earlier assumed to be recoverable will not be developed,”.
A decline in oil supply due to low investments could force the oil demand peak at around 2027-2028, the company said.
COVID-19 imposed changes on how people work and travel could have a long-lasting impact and slow oil demand growth, while the deployment of renewable energy and electric cars would accelerate, Equinor said.
It said in the outlook “It is likely that demand for aviation fuels will suffer for many years to come, as the pandemic may have permanently altered the frequency with which we fly,”.
“COVID-19 is likely to lead to slower demand growth for oil products, at least for a period.”
Equinor said for the next few years, however, the oil market was expected to be well supplied, while the Organization of the Petroleum Exporting Countries (OPEC) and other producers may still need to manage the output for some time.
Theoilbloc reported that OPEC said in October, that world oil demand will plateau in the late 2030s and could by then have begun to decline, in a major shift for the producer group.