Moody’s casts dark cloud on global oil demand growth outlook
In a recent research report, Moody’s Investors Service turned bearish on oil demand growth outlook, courtesy of the coronavirus pandemic.
Key quotes
“Global oil demand may have peaked in 2019 as COVID-19 has heightened the risk that behavioural changes.”
“COVID-19 lockdown experience of reduced commuting and business travel, alongside better air quality and family time, may deliver lasting changes in energy consumption.”
“A structural shift in demand creates greater risk in forecasting the price of oil, undermining the assessment of profitability for new projects by the time oil is produced in the future. This could create stranded assets in the future which do not produce the expected levels of financial returns.”
“If economic growth does not offset the potential behavioural and other changes impacting oil demand, it could take a long time to recover to 2019 levels with increased risk that demand already peaked in 2019.”
“Airlines may also be forced to permanently cut unprofitable routes and reduce services, which will reduce the number of flights. We do not expect to see a substantial recovery in passenger demand until 2023.”
“Shipping will also suffer on account of reduced trade, fewer cruises and localisation of supply chains, it said. The change in behaviour and social-distancing norms will prevent low oil prices from stimulating demand.”
“Oil demand would fall further after 2025 as emission targets in China, Europe and California require more electrification and greater internal combustion engine efficiency.”
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
