The pace of the world economic recovery and oil demand has slowed, if not come to a halt, at least temporarily. This year oil prices, and the state of corporate oil revenue will all decrease significantly. For the world, 2020 will go down as the most dismal since World War II.
But dynamism – change – in the oil market has not disappeared. The contractions of 2020, including upstream investment, could set the stage for the return of $50/bbl and higher oil in 2021 and 2022. Market downturns, like elections, have consequences. But so much depends on when COVID-19 is contained, and effective vaccines become widely available. Mainland China, which has successfully contained COVID-19, reflects what could happen. Mainland China is the only major market in the world where oil demand is above year-earlier levels. Next year will be crucial. IHS Markit assumes that effective vaccines will be available in mid-2021, which would then begin to pull oil demand off its current plateau and to higher levels.
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