Integrated Annual Report 2020

Expected developments in the external environment in 2021

The International Monetary Fund (IMF) expects the global Gross Domestic Product to grow 5.2% in 2021, so the growth should be fast considering the 2020 global economic recession caused by the COVID-19 pandemic (-4.4%). The economies of Eastern Asia and the Pacific are predicted to grow significantly, by 6.7%, with China registering a growth rate of 8.2%. Interestingly, China was the sole large country to record positive economic growth in 2020, of 2.3%. GDP in Southern Asia is also expected to grow at a strong rate, by 8.1%, with India’s economy expanding by 8.8%. According to the IMF, economic growth rates in developed countries will be markedly lower. The US, eurozone and Japanese economies are expected to grow by 3.1%, 5.2% and 2.3%, respectively. A comparable rate of economic growth should be recorded in Russia (up to 2.8%) and in South American countries, including Brazil (up 2.8%), Mexico (3.5%) and Argentina (4.9%)5. Taking into account the 2020 GDP contraction, Poland will be among the EU’s fastest growing economies, with an expected growth rate of 4.6%. Importantly, growth in Europe will be driven mainly by Western European countries: Spain (7.2%), Portugal (6.5%) and France (6.0%). In Central Europe, Slovakia should play the key role, with a growth rate of 6.9%.

(5) World Economic Outlook, International Monetary Fund, October 2020.

Projected economic growth rate in 2021 (%)

Source: In-house analysis based on IMF data.

International organisations forecast an increase in oil demand of 6.2% year on year in 2021, to 96.9 million b/d, still below the pre-pandemic level recorded in 2019. Many agencies also stress that certain fuels (including diesel oil) reached peak consumption back in 2019 (particularly in Europe). Having said that, oil demand will continue to grow in the coming years, mainly in Asia and the Pacific region (the economic situation of India and China as its crucial driver). Many countries will probably implement economic recovery measures in 2021, which should stimulate steady growth in fuel consumption. The proposed stimulus packages may cause fuel consumption to come close to the 2019 levels in 2022.

The COVID-19 pandemic induced shifts in the use of other energy sources as well, including coal. Consequently, many of the proposed economic recovery reforms, particularly those implemented in Europe, are expected to focus on the development of renewable energy sources (RES). Offshore wind farms are beginning to play a key role in the EU. Against this backdrop, natural gas, which is relatively greener compared with coal, will be a ‘transition’ fuel towards greener energy. However, coal will remain an important energy source in the coming years.

The key factor affecting crude production in 2020 was the OPEC+ countries’ April decision to reduce output amid the lockdown restrictions, as well as the falling fuel consumption and crude oil prices across international markets. The production cuts in effect throughout 2020 caused oil prices to stabilise. But lower fuel consumption also affected decision making of independent oil producers in the US. A production rebound is expected in 2021, which will depend on oil prices on the US exchange and a rise in the number of active rigs (the process has continued since the end of 2020). Production may be expected to increase in other countries too, including Norway, Brazil and Canada, if they gradually rebuild their economies. The political situation in the Middle East will be crucial to stabilising both production and prices. The new US administration led by President Joe Biden may return to talks with Iran regarding the nuclear programme, which would increase the availability of Iranian oil on global markets.

In addition to the COVID-19 pandemic (easing of restrictions), key challenges to European refineries will include even fiercer competition from oil refiners located in the Middle East, Asia and the Pacific (India, China) and Russia, especially when fuel demand remains subdued. Given the prevailing market conditions, many refineries on the continent may close down. Nevertheless, the vaccine rollout started in late 2020 and early 2021 may contribute to easing the restrictions and spur an increase in fuel demand.

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