It’s easy to get caught up in oil’s recovery. After an exceptionally fraught year, hopes are high that putting 2020 soundly behind us can only mean better days. But there’s still a long way to go to get back to anything like normal.
That hard reality didn’t stop crude prices from rising by $14 a barrel, or 37%, since the beginning of November. That’s when trial data showed vaccines were proving extremely effective against SARS-Cov-2, followed by the rapid roll-out of the first doses in the U.K. and U.S. There’s a sense of optimism that hasn’t been felt since the world woke up early in the year to a new disease that had emerged in China.
The relief being felt in the oil market is understandable. As the virus spread, it had a devastating impact on lives and livelihoods. The only tool most governments had to slow contagion was to shut down their economies, causing an unprecedented slump in oil demand.
The world’s major oil forecasters — the International Energy Agency, the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries — slowly began to factor the virus into their outlooks, initially seeing its impact limited to China. But by April it was apparent that the disease was spreading rapidly elsewhere. Forecasts for 2020 oil demand were slashed and they haven’t recovered much in subsequent months as the chart below shows.
Oil consumption this year is now expected by all three to be about 10 million barrels a day below the volumes they were forecasting at the end of last year — enough to fuel all of Africa and Latin America.
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