Energy Demand to Recover in H2 2021 - Baker Hughes

Demand for energy products is likely to recover in the second half of the year, officials from the oil company Baker Hughes (NYSE: BKR) said today.

Lorenzo Simonelli, chief executive of the company, told CNBC he is “cautiously optimistic” about an uptick in demand for energy in the second half of the year.

Demand is still hampered by lockdowns in certain parts of the world that are likely to weigh on fuel sales in the first part of the year. However, the vaccine rollout and improving economic situation will facilitate a rebound in demand starting from the third quarter.

The expected acceleration in recovery will create investing opportunities, according to Simonelli.

“It’s going to be different in different locations geographically. As we look at the lower cost basins, you look at the Middle East, that’s where you’ll see some of the production increases.”

On US shale producers, he said:

“There’s a lot of capital discipline, [and] obviously we’re undergoing an energy transition as well.”

“We think this will be different, just given the capital discipline and the focus that producers are having on … returns and cash flows and constraining some of the capital inflows.”

According to the IEA, the demand will recover by 5.5 million barrels per day to 96.6 million this year. This is by 0.3 million barrels lower from last month’s assessment due to new lockdowns.

“The global vaccine roll-out is putting fundamentals on a stronger trajectory for the year, with both supply and demand shifting back into growth mode following 2020′s unprecedented collapse,” the IEA said in its January report.

“But it will take more time for oil demand to recover fully as renewed lockdowns in a number of countries weigh on fuel sales,” it added.

OPEC is a bit more cautious as it forecasts global oil demand to increase by 5.9 million barrels per day to an average 95.9 million bpd in 2021.

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