Key drivers in 2021
Early in 2021, global demand for liquid hydrocarbons was about 5% lower than at year-end 2019.Energy Aspects 2021–01_Oil_-_Data_review_-_Key_agency_forecasts.pdf. Anti-COVID measures were less stringent than in spring 2020 and were not introduced simultaneously. Mass vaccination campaigns began in many countries. The timeline for the world to return to normal depends on the effectiveness of vaccines, the rate that herd immunity develops and whether the virus mutates into weaker strains.
The global surplus inventories of crude oil and petroleum products began declining as early as the second half of 2020. Early in 2021, inventories came close to their long-term average, as the crude market remained in steady balance amid growing demand and persistent production constraints. COVID-19 restrictions in various countries and China’s build-up of strategic oil inventories are the key demand uncertainties this year. Production trends in Iran and Libya as well as OPEC+ production restrictions are the main supply-side issues.
In the medium term, demand for oil will depend primarily on the economic growth rates and financial stability of the major economies. On the supply side, it is not clear yet when shale production in the USA and production activity elsewhere will recover, and what production levels will be reached. In the long term, the global oil market will be influenced by consumer behaviour characterised by reduced mobility and contact, along with decarbonisation policies and progress towards the development and implementation of decarbonisation technologies.