Global demand for oil is expected to remain low this year compared to pre-Corona levels


Dr. Gil Michael Befman, Chief Economist of Bank Leumi, estimates in the weekly oil review that “the demand for oil is expected to remain relatively low in the near future, even though the demand for petroleum products has begun to rise from the low level. The IEA estimates global demand for oil, even after it recovers, is expected to remain low during the year compared to the level it was before the corona virus outbreak.

The IEA also estimates that US fuel demand is expected to be 5% -10% lower this summer than it was in 2019 and demand for jet fuel is expected to remain tens of percent higher than normal in the second half of 2020. In addition, the EIA Global oil inventories are expected to shrink in the second half of 2020 and the contraction in inventories is expected to continue in 2021 as well, which is expected to continue to reduce pressure on oil storage sites.

“The recovery in demand for oil is expected to be slow and lasting over time, due to the slowest recovery in aircraft fuel consumption due to the difficult situation of airlines and the restrictions of aviation in a large number of countries.

The equilibrium in the oil market is expected to change, from a market with a large supply surplus to a market with a small demand surplus under the following conditions: China will be able to stop the spread of the second wave of corona virus; There will be no significant second wave of infection in the eurozone and other countries; Demand for petroleum products will continue to rise at the current rate as well; OPEC + members will adhere precisely to production quotas.

In the event of a significant second wave of Corona virus outbreaks, closures are expected to return and demand for oil is expected to fall back below global production volumes and contribute to the re-emergence of oversupply.

It seems that only after curbing the spread of the corona virus, in a way that will allow clear and lasting relief for the major oil consumers – aviation and transportation – will it be possible to talk about the continued rise in the price of oil. If the return of economic activity increases the rate of spread of the corona virus and the countries decide to return the closures in part or in full, then the recovery in demand for oil will be at a much later date, depending on the dynamics of the virus’ effects.

“Looking to the end of 2020, futures are predicting relative stability in the price level of BRENT and WTI. Now that the supply side has been significantly limited, and perhaps not sustainably over time, the direction of oil prices will increasingly depend on emerging demand trends. When the main factor influencing this is the course of the virus, there is a real concern that during the period remaining until the end of 2020, oil prices may fall again, as the signs of a worsening of the virus continue to increase.

Befman notes an interesting ruling in the environmental context given in the U.S. and also relates to the political context; “The U.S. court ruled that oil pipeline operations in North and South Dakota should be halted due to criticism of environmental and other damages. Indians) from this area, affected by the fact that the piping in question passes through their territories.

Piping activity poses a real threat to water sources and damage to the holy sites of this population. This is a victory for the specific opponents in South Dakota and North Dakota and it is also a broader move in the US against the US administration and in favor of the environment and the protection of these human rights against big and polluting businesses.

“This is a temporary halt to the operation of this important transmission pipeline, until an in-depth examination of the various consequences, but if Joe Biden is elected president, there is a real chance that the temporary shutdown will become prolonged. Oil to the various markets and create a certain “bottleneck” in the field of oil transportation.

The EIA estimates that U.S. oil production in 2020 will average about 11.6 million barrels per day, a decrease of about 0.6 million barrels per day from the average level in 2019. In 2021, U.S. oil production is expected to be even Lower, about 11 million barrels a day. “

In conclusion, Befman notes that “in our view, during 2021, as long as the expectation of a recovery in economic activity is established, this will be significant as a factor supporting the rise in oil prices, as reflected in Bloomberg’s consensus forecast. By the end of 2020 and the member states of OPEC + will be able to meet quotas, despite the temptation to exceed them.

In the longer term, there are a number of factors that support demand for oil, including: the growth of the US economy after halting the spread of the corona virus and the implementation of IMO 2020 regulations that will increase demand for low-sulfur distillates.


It is clarified and emphasized that what is stated in this review does not constitute a substitute for advice that takes into account the data and the special needs of each person. The publication of the information in this review does not constitute a recommendation or opinion in connection with the execution of any transaction or investment in securities, including the purchase and / or sale of securities. It should be emphasized that for any information of any kind that appears in the review – each person must perform additional testing and verification, taking into account his data and special needs. It should be noted that the information may contain errors and that market changes and / or other changes may apply to it, and that significant deviations may also be discovered between the forecasts and analyzes that appear in the actual situation. Therefore, making any decision based on a fact, opinion, opinion, forecast or analysis that appears in the review – is the sole responsibility of the reader.


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