Oil demand is set to rise above pre-COVID levels by the end of 2022, but oil producers will need to boost production, the International Energy Agency (IEA) said on Friday.
The Paris-based body expects consumption to rebound by 5.4 million barrels per day (bd) this year as vaccines are rolled out and economies reopen. Consumption declined by a record 8.6 million bd in 2020 as the coronavirus pandemic took a hold.
It expects a further 3.1 million bd increase in 2022, to average 99.5 million bd with an increase at the end of the year that will surpass the level of demand before the COVID pandemic.
IEA warned "the recovery will be uneven not only amongst regions but across sectors and products", and slow vaccine distribution could "jeopardise" any rebound.
Demand is expected to recover faster in wealthy countries that had earlier access to vaccines, while some industries like aviation lag as some travel restrictions remain and more people continue to work from home.
"A widespread return of the global aviation industry to normal capacity appears off the cards until most countries have reached herd immunity, which may not happen until late 2022," the report said.
Countries outside the Organisation of Petroleum Exporting Countries and its allies (OPEC+) group are expected to boost output by 1.6 million bd next year, to exceed 2019 levels.
While, OPEC+ countries will have 6.9 million bd of spare capacity even after lifting production by 2 million bd over the May-July period.
"Even if OPEC+ producers were to fill the gap created by demand growth, the bloc's output would still be more than 2 mbd below the 2019 average," IEA said.
OPEC+ is slowly increasing output as the global economy recovers. Members of the OPEC cartel and allies like Russia cut production in 2020 to bump up and stabilise oil prices which briefly dropped into negative territory at the onset of the pandemic.
IEA said oil industry stocks in the OECD advanced economies fell below their pre-pandemic 2015-19 average for the first time in over a year.
Crude oil (CL=F) and brent (BZ=F) were up 0.3% to $70.46 (£50) and $72,65 respectively on Friday morning as both benchmarks continue to rally. Oil futures rebounded to record highs last week, with crude hitting $70 a barrel for the first time since October 2018 and brent rising above $72.
On Wednesday, the US dashed hopes of Iranian crude exports returning. US Secretary of State Antony Blinken said that even if America reached a nuclear deal with Iran, hundreds of sanctions on Tehran would remain in place.
It comes after the IEA published a historic proposal to reach net zero emissions by 2050, a prerequisite to meet the Paris climate accord goal of limiting global warming to 1.5 degrees Celsius above pre-industrial levels.
The plans published earlier in May called for energy groups to stop all new oil and gas explorations from this year to keep global warming in check, the group said.
Apart from slashing fossil fuels the IEA also said an unprecedented jump in spending on low carbon technologies would be required — around $5tn in energy investments per year by 2030, up from around $2tn.
It also urged global countries to focus on clean energy investment to enable emerging and developing economies to successfully transition. Annual investment in clean energy in emerging and developing economies will need to increase sevenfold by 2030 if the world is to reach net-zero emissions by 2050, the group said.
While these countries are home to two-thirds of the world population and will represent 90% of future emissions growth, they only receive 20% of the funding that goes into low-carbon technologies and other green investments, according to a new report in partnership with the World Bank and World Economic Forum.
Watch: Solving climate crisis will require 'total transformation' of global energy use, IEA says