Crude demand took the largest hit ever recorded in the first half of 2020.
Dubai - Demand recovering sequentially as lockdowns ease around the world and workers retur to their daily commutes
It will take three years for global oil demand to recover from Covid-19 and get used to its new normal - assuming the world has a vaccine or a cure in 2021, say industry analysts.
Bank of America Merrill Lynch (BofAML) analysts say that if a Covid-19 vaccine is approved in late 2021, air travel will rise to 75 per cent in 2022 and 90 per cent in 2023. Thus, over the medium-term, oil demand gets a positive bump in 2021-23 as it recovers the losses it suffered in 2020.
Demand took the largest hit ever recorded in the first half of 2020, as road and air travel collapsed during the global lockdown. Demand contracted 16 million bpd year-on-year in the second quarter, which is five times more than the previous largest-ever quarterly demand drop in the fourth quarter of 2008 at the height of the global financial crisis.
Demand is now recovering sequentially as lockdowns are being eased around the world and workers have started to return to their daily commutes.
Road traffic has almost fully recovered and the US bank analysts expect global oil demand from road use to recover to positive growth territory by the end of this year. Air travel, however, has only recovered moderately.
"Air travel by number of planes flown is still down about 50 per cent from pre-Covid levels. We expect air travel will not recover materially beyond this point until we get a vaccine or an effective cure for Covid-19," said Peter Helles, commodity strategist at BofAML.
"Most experts expect that it will be 12-18 months before we have a safe and effective vaccine, which governments around the world will roll out for mass immunisation and until that point we do not see air activity recovering much above 50 per cent of pre-covid levels which is our baseline for 2021."
"Assuming we do get a vaccine in late 2021, we have air travel rising to 75 per cent in 2022 and 90 per cent in 2023. Thus, over the medium term oil demand gets a positive bump in 2021-23 as it recovers the 2020 loss," he added.
BofAML economists assume an effective vaccine in the third quarter of 2021.
Though there is a spike in new Covid-19 and some countries are even facing second wave of the pandemic, the good news is that the number of deaths is rapidly declining. In emerging markets, deaths are past the peak.