Peak oil demand may occure between 2030 and 2040 - Gibson
Peak oil demand is likely to occur between 2030 and 2040, however some regions such as Europe could peak earlier than developing economies in Asia, Africa, and the Middle East, according to Gibson Shipbrokers weekly report. Therefore, slower longer term oil demand growth rates and an eventual peak in demand suggests tanker owners will need to engage in lower fleet replenishment and this investment will likely concentrate on replacing older and less economical tonnage as well as ensuring regulatory compliance, the analytics say. Over the medium term, aside from recession risk, the oil trade is expected to continue growing before a longer-term peak and then decline once this eventually materialises.
After COVID-19 destruction demand has continued to expand despite oil prices trading firmly in the $100/bbl.
"This calls into question when exactly peak oil demand could occur and what this might in practice look like as the demand outlook varies by region, particularly in terms of decarbonisation policies. Most current estimates place peak demand occurring between 2030 and 2040, although it is worth noting the subsequent decline in demand is unlikely to be cliff edge and oil is likely to play a role in the global economy for decades to come past 2040", - according to Gibson's report.
In their latest monthly report, the IEA has revised down its demand growth estimates for 2022 and 2023. It now forecasts demand at approximately 99.2 mbd and 101.32 mbd respectively versus 99.43 mbd and 101.6 mbd in their June forecast.
Demand has been improving compared to 2020 levels. Easing mobility restrictions are increasing seasonal demand for jet and road transport fuel, particularly in emerging markets, which in turn has resulted in higher refinery runs as refiners look to capture higher margins. This has led to higher crude demand; and comes as the global crude trade continues to shift and readjust to the new trade reality following sanctions on Russian oil. Other areas of continued oil demand include power generation where European and Middle Eastern utility companies are increasingly viewing oil as a cheaper alternative to natural gas and LNG in electricity generation. The petrochemical sector also represents a key source of expected future oil demand, in particular naphtha demand has been strong in recent years.
When it comes to putting an expected date on peak oil demand, a key factor is decarbonisation policy, analytics report. Europe, the UK, US, and China are all scheduled to phase out the sale of new gasoline and diesel vehicles by 2040; with sales expected to decline dramatically over the course of the 2020s and 2030s in line with broader targets of net zero by 2050.
