Oil firm Equinor expects global oil demand to peak by around 2027-2028, two-free years earlier than the company previously saw, as a result of the COVID-19 pandemic, it said on Tuesday.
There is no agreement on when oil demand could peak, but expectations weigh on oil companies’ plans to explore for and develop new resources.
“Earlier assumptions for peak oil demand to happen around 2030 may be challenged,” Equinor said in its annual energy outlook.
Equinor sees oil demand returning to the pre-pandemic level of around 100 million bpd by around 2025, and falling to 88 million bpd in 2050, under its central scenario, dubbed Reform.
A year ago, it saw demand peaking just before 2030 at 105 million barrels per day (bpd), mainly due to electric cars denting demand for fossil fuels, and declining to 93 million bpd by 2050, under the same scenario.
Supply constrains due to underinvestment could also impact the demand growth in the future, after oil firms cut investments by about 30% this year, the company said.
“The consequence may be that billions of barrels of oil that were earlier assumed to be recoverable will not be developed,” Equinor added.
A decline in oil supply due to low investments could force the oil demand peak at around 2027-2028, the company said.
Equinor said COVID-19 imposed changes on how people work and travel could have a long-lasting impact and slow oil demand growth, while deployment of renewable energy and electric cars would accelerate.
“It is likely that demand for aviation fuels will suffer for many years to come, as the pandemic may have permanently altered the frequency with which we fly,” it said in the outlook.
“COVID-19 is likely to lead to slower demand growth for oil products, at least for a period.”
For the next few years, however, the oil market was expected to be well supplied, while the Organization of the Petroleum Exporting Countries (OPEC) and other producers may still need to manage the output for some time, Equinor said.
World oil demand will plateau in the late 2030s and could by then have begun to decline, OPEC said in October, in a major shift for the producer group.
(Reporting by Nerijus Adomaitis; editing by David Evans)