GLOBAL oil demand is expected to reach pre-pandemic levels by early next year as the economy recovers, although spare refining capacity could weigh on the outlook, producers and traders said at an industry conference Monday.

The outlook is in line with a forecast from the Organization of the Petroleum Exporting Countries (OPEC), but ahead of estimates from the International Energy Agency (IEA).

Global demand is seen rising to 100 million barrels per day (bpd) by end-2021 or in the first quarter of 2022, energy company Hess Corp. president Greg Hill said.

The world consumed 99.7 million bpd of oil in 2019, according to the IEA, before the COVID-19 pandemic hammered economic activities and fuel demand.

While a persistent rise in COVID-19 cases across markets has hurt recovery in demand for some refined products such as jet fuel, consumption trends of petrol and diesel indicate growth, industry leaders noted at the Asia Pacific Petroleum Conference (APPEC 2021) conference.

“We witnessed a lot of demand destruction as a consequence of reduced economic activity, disruption to transportation, disruption to free flow of goods. ... But that’s past us,” said Alan Heng, interim CEO of Singapore’s Pavilion Energy.

“We are dealing with the post-pandemic period and we are learning to live with the virus. ... Energy demand has started to pick up and that’s good news for us.”

Recovering demand is expected to boost profits for refiners and create room for returning or new production, but experts warn that spare refining capacity would be a drag.

“There’s still a lot of unutilized capacity and a lot of capacity has been taken off stream,” said Eugene Leong, president of BP Singapore and CEO of BP’s trading and shipping arm of Asia Pacific and the Middle East.

“The spare [refining] capacity is probably going to act as a little bit of a cap on margins,” he said.

“This year alone we’ve seen some mega refining and petrochemical complexes start up, so I think that’s going to be challenging for refining.”

(SD-Agencies)