Oil prices broke the US$80 threshold. Why do experts say that demand will not be disrupted this time?

On October 11th, oil analyst Tsvetana Paraskova wrote an article that the US$80 oil price will not hit demand, and analyzed the reasons behind it: By the end of this year, global oil demand is expected to return to the pre-epidemic level; US demand is in a leading position , The demand for petroleum products this summer is close to the highest level in history; the promotion of vaccines in Asia will accelerate the recovery of global petroleum demand.



As global demand continues to recover, and record natural gas prices have stimulated more demand for petroleum products for power generation and heating, oil prices are expected to continue to rise in the coming months after they exceed $80. Although many countries have lingering concerns about the delta variant virus, with the increase in vaccination rates and strong economic recovery, advanced economies have eased the blockade. Although developing economies in South and Southeast Asia are still implementing intermittent local blockades, global oil demand continues to grow and will reach pre-epidemic levels within a few months .

In addition, the soaring prices of natural gas and electricity have boosted the overall energy market and will lead to more demand for petroleum products, especially in parts of Asia.

Ed Crooks, vice chairman of Wood Mackenzie Americas, pointed out that although the epidemic is still raging, global oil demand continues to recover at a healthy rate. The epidemic is still a factor affecting the global oil market, but "its impact on the world economy and energy demand is fading."

Like many other consulting firms, analysts and oil giants, WoodMac expects global oil demand to reach pre-epidemic levels in the third quarter of 2022, even if demand growth is uneven across regions. According to Wood Mackenzie's data, global oil demand is expected to grow to approximately 99 million barrels per day in this quarter, up from 97 million barrels per day in the third quarter. Demand in the third quarter increased by 6% compared to the third quarter of 2020.

Many analysts and oil companies believe that global oil demand will return to the level before the 2019 pandemic crisis as early as early 2022. If it can be earlier, it can be restored to this level by the end of this year.

Wood Mackenzie's Crooks pointed out that U.S. oil demand is at the forefront of recovery, and refined oil demand this summer is close to a record high of approximately 21 million barrels per day. He added: “Travel data shows that despite the delta variants causing a surge in the number of infections in the U.S., people are still driving.”

The promotion of vaccines in developing Asian economies may ease the pressure of intermittent lockdowns in the region.

Suzanne Danforth, head of U.S. downstream oil markets at Wood Mackenzie, said that countries with a slower pace of demand recovery than the U.S. are expected to catch up.

As demand continues to recover, the supply side has also put upward pressure on oil prices. Last week, although oil-consuming countries including the United States called for increased supply, OPEC+ decided to maintain its plan to ease production cuts.

OPEC+ will increase its supply of 400,000 barrels per day in November, which is the lowest level expected by the market before the meeting. The tightening of oil and other energy commodity markets has reignited speculation about how high oil prices can go and whether they can reach $100 a barrel, especially if the northern hemisphere is colder this winter than in previous years. US$80/barrel is usually regarded as the trigger point for the collapse of demand, but due to the tight global natural gas and coal markets, oil prices that will disrupt demand this winter may be even higher.



(Daily chart of Brent crude oil main contract)

GMT+8 At 8:42 on October 12, the main contract price of Brent crude oil was reported at US$83.36/barrel.