A slow economic recovery from the pandemic threatens to delay a full rebound in world energy demand to 2025, the International Energy Agency (IEA) said on Tuesday.

In its central scenario, a vaccine and therapeutics could mean the global economy rebounds in 2021 and energy demand recovers by 2023, the IEA, which advises Western governments on energy policy, said in its annual World Energy Outlook.

But under a “delayed recovery scenario,” the timeline is pushed back two years, it said.

“The era of global oil demand growth will come to an end within the next ten years, but in the absence in a large shift in government policies, I don’t see a clear sign of a peak,” IEA chief Fatih Birol told Reuters.

The Paris-based IEA sees global energy demand falling by 5% in 2020, CO2 emissions related to energy by 7%, and energy investment by 18%.

Demand for oil is set to fall by 8% and coal use by 7%, while renewables will see a slight rise.

Photo: IEA

Uncertainty over future demand and the oil price plunge in 2020 could mean that oil producers are unsure how to gauge investment decisions leading to a mismatch in supply and demand, stoking future market volatility, the IEA warned.

OPEC member Libya on Sunday also lifted force majeure at its Sharara oilfield.

Libya’s total output on Monday was expected to hit 355,000 bpd while a full return of the 300,000 bpd Sharara field would nearly double that.

Rising Libyan output will pose a challenge to OPEC+ - a group comprising OPEC and allies, including Russia - and its efforts to curb supply to support prices.

Oil prices have collapsed as the coronavirus crisis curtailed travel and economic activity. While in the third quarter, an easing of lockdowns allowed demand to recover, OPEC sees the pace of economic improvement slowing again.

A key OPEC+ monitoring committee, co-chaired by Saudi Arabia and Russia, is scheduled to convene online Oct. 19, while the full coalition meets Nov. 30 to Dec.

The Trump administration imposed a new round of economic sanctions against Iran’s financial sector.

The measure imposes penalties against 18 Iranian banks and comes days before a United Nations arms embargo on the country is set to expire. The action could effectively lock Iran out of the global financial system, further cratering its already collapsing economy.

Iran’s economy is already in tatters, with inflation expected to reach 50% amid government mismanagement and much of its trade throttled by sanctions. Oil exports, a key source of revenue, have also been slashed to record lows under sanctions, but the pandemic-induced crash in oil prices has hobbled the economy even further.

Despite a grim demand outlook for energy as the coronavirus pandemic continues to weigh down the global economy, Goldman Sachs remains bullish on both oil and gas prices, regardless of the U.S. presidential election outcome in November.

“We do not expect the upcoming U.S. elections to derail our bullish forecasts for oil and gas prices, with a Blue Wave likely to be, in fact, a positive catalyst,” the bank’s commodities team wrote in a research note Sunday.  

Goldman sees improved demand in 2021 and tighter supply for both gas and shale oil superseding election results, though a Biden administration could provide a further boost to oil prices by making production, especially for shale, more expensive and more regulated.  

If elected, Biden seeks to achieve a carbon pollution-free energy sector by 2035, and analysts expect his administration to impose regulations that would increase shale production costs with things like taxes and methane restrictions, which the Donald Trump administration had eased. Goldman estimates such taxes could increase costs by as much as $5 per barrel. And expected dollar weakness under Biden also provides upside risk to prices. 

If Trump is re-elected, while pro-oil and gas policies would remain in place, “its impact would likely remain modest at best,” Goldman’s analysts wrote, “given the more powerful shift in investor focus to incorporate ESG metrics and the associated corporate capex re-allocation away from fossil fuels.”

The investors might pay attention to the OPEC+ monitoring committee on Oct. 19.