27.10.2020

Maritime market update: long-term oil demand uncertainty as a covid-19’s aftermath

Risavika LNG front month has gained 1.8 % week on week reaching 25.15 Eur/MWh on the forecast of higher demand for natural gas in November, reflecting a seasonal change. However, the supply side remains healthy and gas storages are more than 90 % full.

Following the weakening of oil prices and the inventory builds in ARA, fuel oil 3.5 has lost 1.1 % to 243.03 USD/t, low sulfur oil (MFO 0.5) has decreased by 1.6 % and closed at 302.71 USD/t, while MGO 0.1 has lost 2.5 % week on week and closed at 328.2 USD/t.

According to long-term outlooks released these last two months by BP, Total, OPEC and the IEA, global oil demand in 2040 could be as low as 58 million barrel per day (mb/d) or as high as 109 mb/d depending on energy and environmental policy choices. The Argus, BP and Total “business as usual” scenarios result in 2040 oil demand remaining close to pre-Coronavirus levels around 100 mb/d. In contrast, IEA and OPEC both model existing policy scenarios with demand remaining rather higher, on an apparent plateau near 109 mb/d through 2040. Parallel projections assume much more aggressive policy intervention to achieve global net zero CO2 emissions by 2050 or 2070, which if enacted as an immediate aftermath of Covid-19 can potentially push oil demand onto a lower path. Peak demand could occur as early as 2025 and consumption levels in 2040 of 75 mb/d or less are 25-30% lower than in 2019. BP’s “Net Zero” scenario goes even further, cutting global demand to around 60 mb/d in 2040 and some 30 mb/d by 2050. With the transport and petrochemicals sectors accounting for over 70% of oil use in 2019, the outlook for these sectors will be key to oil demand trends longer term.

LNG Risavika - LNG FOB Risavika 

LBG Risavika 10 % - 10 % blend of Liquified Biogas

FO 3.5 FOB Rdam – European 3.5% Fuel Oil Barges FOB Rdam (Platts) Futures Quotes

MFO 0.5 FOB Rdam - European FOB Rdam Marine Fuel 0.5% Barges (Platts) Futures Quotes

MGO 0.1 FOB ARA - Gasoil 0.1% Barges FOB ARA (Platts) Futures Quotes

ULSD FOB ARA - European Diesel 10 ppm Barges FOB ARA (Platts) Futures Quotes

Source: CME Group, Gasum, Argus Media

*An estimate for LNG FOB Risavika 

** An estimate for 10 % LBG blend FOB Risavika