IEA Backpedals, Says Oil Demand Will Soon Reach Pre-Crisis Levels

Oil demand is recovering faster than previously expected, and unless OPEC+ puts additional barrels on the market on top of the plans to restore 2 million barrels per day (bpd) by July, oil prices will be heading higher as the gap will widen, the Executive Director of the International Energy Agency, Fatih Birol, told Bloomberg Television in an interview on Tuesday.

According to Birol, global oil demand could return to the pre-crisis levels of 2019 as soon as in a year’s time.

“Demand in one year or so may well come back to the levels of before the crisis,” Birol told Bloomberg, noting the strong demand in the United States, Europe, and China.

This most recent proclamation regarding oil demand is in stark contrast to its forecast three months ago, when the IEA said in its annual Oil 2021 report with projections through 2026 that global oil demand would take until 2023 to return to the pre-pandemic levels of 100 million bpd. Back then, the Paris-based agency warned that COVID-19 would change parts of consumer behavior forever, with global gasoline demand likely past its peak already.  

Although oil demand is set to grow from the crisis levels, “there may be no return to ‘normal’ for the oil market in the post-Covid era,” the IEA said in the middle of March.

But in its monthly Oil Market Report in May, the IEA said that the excess oil inventories of the past year had been all but depleted, and a strong demand rebound in the second half this year could lead to even steeper stock draws.

“The widening supply and demand gap paves the way for a further easing of OPEC+ supply cuts or even sharper stock draws,” the IEA said in the report.

The agency’s head Birol said today that “One thing is clear: in the absence of changing the policies, with the strong growth coming from the U.S., China, Europe, we will see a widening gap” between demand and supply. This could “in turn would put further upward pressure on the prices,” Birol told Bloomberg.