In 2020, world-wide demand for aviation fuel plunged by 41%, from 7.9 million barrels per day to 4.9 million bpd, according to March figures released by the International Energy Agency (IEA). The decline for petrol and diesel was only 6 %, from 28.8 million bpd to 27 million bpd.
And, according to the IEA forecasts, total demand for petrol and diesel in 2022 will surpass pre-crisis levels, but that will only occur with aviation fuel only in 2024.
Unlike cars or commercial vehicles, aimed principally at the domestic market, international air transport depends heavily on how fast Covid vaccines are made available.
“Therefore, jet fuel demand will be the last to recover in the transportation sector,” Sun Xiansheng said.
Against the background of a pandemic, there are serious reductions in both demand and in supply – the reason behind a surplus in production capacity of 7.7 million bpd in OPEC countries and 1.6 million bpd outside the cartel.
Such a substantial surplus can well cool any price rises, Sun said, particularly as some producers could sharply increase supply. This, he said, applied not only to the United States, which decreased production in 2020 from 12.2 million bpd to 11.3 million bpd according to IEA estimates and Saudi Arabia, which agreed in February, March and April to cut production by a further 1 million bpd.
“There will be more resources flowing into the market,” Sun said.
That was confirmed by the IEA’s March forecast that over 2020-2026 world-wide supply will increase by 10.3 million bpd, included 3.1 million bpd provided by Iraq, Brazil and Guyana.
Sun said the OPEC+ alliance should boost production more decisively – as reductions had stimulated price rises.
“OPEC+ countries need to do this before the full recovery of economies and oil demand, while they should learn more from history and act more decisively,” he said. “A high oil price is bad both for the demand side and supply side, since there will be more competition from U.S. shale gas, alternative energy and electric vehicles.”
The OPEC+ agreement, he said, should therefore probably not be extended beyond its expiry date of April 2022. But Russia and the cartel should continue to coordinate their actions in view of common threats, competition from the United States or the challenge of carbon neutrality.