Vaccination hiccups could prevent the recovery of up to 1 million bpd of oil demand in 2021

Source: press release, 19 March 2021

Global oil products demand and impact of vaccination hiccups (source: Rystad Energy OilMarketCube, research and analysis)
Global oil products demand and impact of vaccination hiccups (source: Rystad Energy OilMarketCube, research and analysis)

The vaccine distribution cycle was not expected to be perfect, but the recent spike in cases in Europe, which some are calling the third wave, is not being met with a brigade of vaccines, but with vaccine skepticism instead. Rystad Energy has modelled the impact of the possibility of extended vaccination campaign hick-ups and has found that the recovery of up to 1 million barrels per day (bpd) of oil demand is at risk in 2021, depending on the duration of the setbacks.

The latest pandemic hurdle in Europe is the temporary ban of the AstraZeneca vaccine in several EU and now a handful of Asian countries, which puts the recovery of economic activity and oil demand at risk. In its COVID-19 research, Rystad Energy has forecasted that the AstraZeneca vaccine would make up 2.6 billion of the total global 11 billion global vaccine doses (1 inoculation is 1 dose) produced in 2021.

At the moment, Rystad Energy estimates Western Europe boasts a near 8.5% vaccinated rate, which is forecast to reach 50% by June 2021. A ban or delay in vaccine distribution in Europe could likely be filled by other vaccine producers, but it is still estimate that the associated logistical and bureaucratic obstacles would trigger a delay of Europe reaching the threshold by between 1 and 3 months.

Rystad Energy currently forecasts global oil demand in 2021 at 95.2 million bpd, but under a slow vaccination scenario, caused by the AstraZeneca ban and other possible future setbacks, oil demand in 2021 could only average at as low as 94.2 million bpd. The extent of the recovery loss will depend on the duration of the delays and consequently on how quickly vaccination campaigns progress.

“We estimate that each country’s oil demand recovery will speed up after at least half of its population has been vaccinated, driven by road fuels demand. It’s too soon to tell if the AstraZeneca hiccup will momentously dent demand or not. A complete ban of the AstraZeneca vaccine could delay reaching the 50% threshold by 2 months, but this scenario is a bit extreme,” says Sofia Guidi Di Sante, oil markets analyst at Rystad Energy.

“As of now, the 50% vaccination threshold may be postponed by a few weeks in some countries with negligible effects on oil demand, but again we need to wait on further developments,” adds Guidi Di Sante.

Rystad Energy’s Slow Vaccine scenario accounts for a slower rate in production and distribution of the vaccines than what is officially announced. The model considers potential production or distribution stops, which can be related to capacity but also safety issues. The most serious theoretical snafu would be an issue with insufficient storage routines for the vaccines, which would trigger a potential delay in vaccination campaigns on a global scale.

Learn more in Rystad Energy’s OilMarketCube.