Short-term oil demand is still growing strongly and will continue to do so through the end of 2020, a trend taking place despite the market’s increasing focus on electric vehicles (EVs) and the forecast future plateau in oil demand, according to a new report from IHS Markit’s oil and gas team.
Refined product demand growth has averaged 1.2-million barrels a day over the last five years, and current global total liquids oil demand growth is at similar levels to what was recorded during the 2003 to 2007 commodity super cycle, referred to as the ‘golden age‘ of refining.
At present, current global total liquids oil demand is about 100-million barrels a day, the report says.
With economic growth robust, and prices still under pressure, indications are that the current strong global refined product demand growth will continue through to the end of 2020, averaging 1.1-million barrels a day each year, for the period.
IHS Markit expects global gross domestic product to grow by 3.4% in 2018 and 2019 respectively, owing to convergence of robust economic activity in many markets around the world.
“Although EVs are making headlines, they are not yet a market force to replace the internal combustion engines that power today’s automotive fleets, so oil demand is currently growing strong,” head of global short-term refining research Spencer Welch said in a statement.
He pointed out that, although EVs had the potential to disrupt the energy and automotive sectors in the longer term, they currently made up about 1.5% to 2% of total global vehicle sales, and accounted for less than 0.5% of the global vehicle fleet, so their influence on the oil market, in the short term, was limited.
The IHS Markit report compares the current oil demand growth surge to demand levels during 2003 to 2007, and identifies underlying significant differences between the two cycles.
“There are key differences between the oil market today and the oil market in 2003 to 2007, which is important when we seek to assess how sustainable this demand growth cycle is, compared with the past,” said Welch.