As the second wave of the COVID-19 pandemic continues to impact energy demand and global economic recovery, the Organization of the Petroleum Exporting Countries (OPEC), has said all forms of energy will be needed to support the post-pandemic recovery and address future energy needs.
According to the cartel, oil is expected to retain the largest share of the energy mix throughout the outlook period, accounting for a 27% share in 2045.
This is just as the International Monetary Fund (IMF), projects that oil prices will average just above $50/barrel in 2021, more than 21% rise from 2020’s depressed level, as the rollout of vaccines and fiscal stimulus programmes will help the global economy post a stronger-than-expected recovery from the pandemic.
The Fund however warned that its forecasts are subject to significant uncertainty, with the pandemic yet to be contained.
Yesterday, Brent Crude traded $55.90, up by 0.04%, while Nigeria’s Bonny Light stood at $54.72 around 5pm local time. Although above the average projected price, demand uncertainty is expected to affect prices.
Specifically, world oil demand is projected to increase from nearly 100 million barrels daily (mb/d) in 2019 to around 109mb/d in 2045.
OPEC Secretary General, Mohammad Sanusi Barkindo, explained that to meet this future demand, the global oil sector will need cumulative investment of $12.6 trillion in the upstream, midstream and downstream through to 2045.
He added that wider societal pressures that could have a profound impact on the investment requirements that are essential to meet the demand needs of tomorrow, need to be identified and addressed.
Speaking during the OPEC/World Economic Forum Connect Virtual Meeting, on Monday, Barkindo noted that while the efficacy of divestment from oil has been called into question, the industry that could make a major contribution to the achievement of the long-term goal of the Paris Agreement should not be ostracized.
In its updated forecast, the IMF now expects global GDP to grow 5.5% in 2021, after a 3.5% contraction in 2020. The 2020 figure has been revised up 0.9 percentage point from the previous forecast issued in October, while the 2021 estimate is a 0.3 percentage point upward revision.
The IMF said advanced economies are projected to recover more quickly than developing countries due to quicker access to vaccines and broader fiscal measures.
“Oil exporters and tourism-based economies face particularly difficult prospects given the subdued outlook for oil prices and expected slow normalization of cross-border travel,” it said.
The IMF uses a simple average of prices of Brent, Dubai and WTI to calculate its oil prices. With that methodology, the IMF said oil prices averaged $41.29/b in 2020 and would rise to $50.03/b in 2021, before falling back to $48.82/b in 2022.
The October forecast had estimated that oil prices would average $46.70/b in 2021.
“Non-oil commodity prices are also expected to increase with those of metals, in particular, projected to accelerate strongly in 2021,” the IMF said.