Rystad Energy Projects Total Oil Demand in 2020 to Fall to 88.1 Million BPD as US Inventories Rise

Its estimates show that total oil demand in 2019 was approximately 99.5 million BPD, which is now projected to fall to 88.1 million BPD in 2020.
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By Akanimo Sampson

Rystad Energy’s newest forecast for oil demand now projects a decrease of 11.5% for 2020, or 11.4 million barrels per day (bpd) year-on-year.

Its estimates show that total oil demand in 2019 was approximately 99.5 million BPD, which is now projected to fall to 88.1 million BPD in 2020.

The forecast is coming as Reuters reports that US petroleum inventories increased sharply last week as the fleet of tankers sent from Saudi Arabia at the height of the volume war started to discharge their crude while the recovery in domestic fuel use remained sluggish.

According to the news agency, total stocks of crude, and products outside the strategic petroleum reserve climbed by almost 15 million barrels to a record 1.41 billion barrels, according to the U.S. Energy Information Administration.

Crude inventories jumped almost eight million barrels to 534 million barrels, reversing a two-week draw, and the largest inventory build for four weeks (“Weekly petroleum status report”, EIA, May 28).

Increased crude stocks were driven by a sharp acceleration in the volume of imports clearing customs, with around half of it discharged from tankers loaded with Saudi crude at the peak of the volume war in March and April.

US crude imports accelerated by two million barrels per day (BPD), the largest one-week increase since 1996, adding an extra 14 million barrels to petroleum supply over the seven days ending on May 22.

Crude imports from Saudi Arabia accelerated by almost 950,000 BPD, the largest one-week increase since 2013, and the fastest rate of importation from the kingdom for almost four years.

If these imports are part of a one-off wave, the legacy of the volume war between Saudi Arabia and Russia fought in late March and early April, they will not change the picture of a market rapidly rebalancing.

Domestic crude production was estimated to have fallen again last week to just 11.4 million BPD, slowing sharply from more than 13.0 million BPD at the beginning of March.

Crude inventories around the NYMEX WTI delivery point at Cushing in Oklahoma fell by more than 3 million barrels last week, the third consecutive draw, with stocks now down by a total of 12 million barrels.

Cushing storage is now 68% full, down from a peak of 83% at the start of May. Local tank farms have spare capacity to store up to an extra 25 million barrels if needed.

Spare capacity at Cushing should ease some concerns about deliverability under the NYMEX WTI futures contract and reduce the risk of extreme pricing dislocations and volatility.

But it may be some time before anxiety among futures traders about deliverability is assuaged and they are confident to trade the front-month contract again.

Stocks of refined products continued to increase, rising a further 7 million barrels to a record 880 million barrels last week.

Gasoline stocks were stable at 255 million barrels, though that was 24 million barrels above the level at the same point last year and 34 million barrels above the 10-year seasonal average.

But distillate stocks continued to surge, increasing more than 5 million barrels, and are now up by 42 million barrels since the economy went into lockdown.

Bloated distillate stocks are 39 million barrels above last year’s level and 37 million barrels above the 10-year seasonal average.

Distillates are heavily geared to the level of manufacturing and freight, ensuring stocks have surged as much of the economy remains stalled.

Stocks are also swelling as jet fuel production is curtailed and surplus jet is blended down into the diesel pool because much of the aviation sector remains shut down.

The total volume of products supplied to the domestic market averaged 16.0 million BPD last week, slightly below 16.6 million BPD the previous week, but still far above the recent low of 13.8 million in early April.

Fuel consumption is trending higher as the lockdown is relaxed but the rate of recovery has slowed. As the lockdown lifts, the impact of the ensuing recession on demand is being unmasked.

However, Rystad Energy is an independent energy research and business intelligence company providing data, tools, analytics and consultancy services to clients exposed to the energy industry across the globe.

May demand is expected to fall by 20.5% to 78.5 million BPD. June demand is forecast at 84 million BPD, down by 14.5% year-on-year.

Further ahead, total oil demand in 2021 is expected to average at 96.3 million BPD.

This update takes into account developments that have occurred up to and including Tuesday, 26 May.

It believes that total global demand for road fuels will fall by 9.9% in 2020, or by 4.7 million BPD year-on-year, landing a bit higher than what we estimated in last week’s report.

Road fuel demand in 2019 is estimated to have been 47.4 million BPD. We now see it dropping to about 42.7 million BPD in 2020.

Most of this reduction took place in April, which saw road fuel demand limited to just 31.8 million BPD globally, a 32.8% drop. May road fuel demand is now estimated at 37.6 million BPD, down by 20.8%. June road fuel demand is now forecast to reach 41.5 million BPD, down by 12.5%.

In 2021, road fuel demand is expected to average at 46 million BPD.

Among the various fuel sectors, we expect jet fuel to be hit the hardest. We expect global commercial air traffic will fall by at least 49.1% this year versus the levels seen in 2019, which we estimate stood at around 99,700 flights per day. For 2021, we expect around 76,800 flights per day. These numbers will be revised as operators continue to cut routes.

Many distressed airlines are facing heavy cost cuts and are laying off unprecedented numbers of employees as many non-essential routes are closed.

As a base case, we now assume that the common summer air travel peak will not occur at all this year. We see global jet fuel demand falling by almost 40.8% year-on-year, or by at least 2.9 million BPD. Last year’s demand for jet fuel was about 7.2 million BPD.

Jet fuel demand in April was as low as 3 million BPD and will shrink further to 2.8 million BPD in May, before rebounding to 3.1 million BPD in June.

In 2021, jet fuel demand is expected to average of 6.2 million BPD.

Total oil demand in the US for 2020 is now forecast to fall by 2.4 million BPD to 18.1 million BPD, an 11.8% decline from 2019’s 20.5 million BPD. April saw a decline of 30.8%, with demand falling to 13.9 million BPD.

The forecast says May will see a decline of 22.6%, with demand falling to 15.7 million BPD. June demand is estimated to decline by 17.8% to 16.9 million BPD.

US road fuel demand in 2020 will fall by 1.1 million BPD, a 10.5% decline to 10.1 million BPD from last year’s 11.2 million BPD. April saw a decline of 39%, with demand falling to 6.9 million BPD. May will see a decline of 20.5%, with demand falling to 9 million bpd. June’s road fuel demand will fall by 15.1% to 9.9 million bpd.

In 2021, total oil demand in the US is expected to average 19.4 million BPD and road fuel demand 10.6 million BPD.

Total oil demand in Europe for 2020 is now forecast to fall by 2.2 million BPD to 12 million BPD, a 15.6% decline from 2019’s 14.2 million BPD.

April saw a decline of 36.2%, with demand falling to 9.2 million BPD. May will see a decline of 27.3%, with demand falling to 10.2 million BPD, while June demand will drop by 19.1% to 11.5 million BPD.

Europe’s road fuel demand in 2020 will fall by 0.8 million BPD, a 12% decline to 6.2 million BPD from last year’s 7.0 million BPD. April saw a decline of 42.7%, with demand falling to 4.1 million BPD. May will see a decline of 27.2%, with demand falling to 5 million BPD. June demand will decline by 14.8% to 6 million bpd.

In 2021, total oil demand in Europe is expected to average at 13.2 million bpd and road fuel demand at 6.6 million bpd.

Aside from energy-related projections, the COVID-19 Report also includes general estimates regarding the spread and development of the pandemic globally, including forecasts regarding how the virus will evolve in the most affected countries.

Meanwhile, Rystad Energy’s numbers are adjusted weekly for every new dramatic step taken by governments to slow the spread of COVID-19.

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