Moderate recovery for oil & gas industries in 2021

Oil & gas industries are expected to post modest demand gains in 2021, in particular during H2-2021 as the global roll-out of Covid-19 vaccines will see energy consumption rebound in parallel with the global economy.

Fitch Solutions forecast growth of 4.1% for fuel demand in 2021, a gain of 3.6mn barrels per day (b/d) but well below the decline of 6.1mn b/d that we estimated for 2020. The start of 2021 may see some rough patches continue, with the current regime of increased lockdowns in several advanced economies enacted in response to second and third waves of infection. 

Fitch expects that 2021 will be a year of two halves, with the bulk of demand returning in the second half of the year as Covid-19 vaccines become more widespread. The differing timing of vaccine adoption, with developed markets seeing the vaccine earlier in 2021 than most emerging markets, will see fuel demand rebound at varying rates by region.

Changes to traditional patterns of fuel consumption will also play heavily in paring back the recovery during 2021. The potential for work-from-home changes to be more permanent could see sustained lower fuel demand as commuting patterns change.

Fitch Solutions expect higher jet fuel consumption in 2021 as more countries open cross-border routes. Lower levels of air travel will still be seen in 2021, although the sector will begin to return to normal. Domestic air travel will likely return to pre-Covid-19 levels sooner than international travel, with consensus expecting pre-Covid-19 levels to return in 2024.

Investment in Oil & Gas is anticipated to rebound slightly in 2021 as oil prices continue to increase above the nadir in 2020, supporting increased production on renewed confidence for a sustained recovery in demand.

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