Global oil demand is expected to return to pre-Covid levels by the end of 2022, with the rebound supported across sectors and products, according to the International Energy Agency.
Demand for crude is expected to grow this year by 5.4 million barrels per day and a further 3.1 million bpd to average 99.5 million bpd.
"While the end of the pandemic is in sight in advanced economies, slow vaccine distribution could still jeopardise the recovery in non-OECD countries," the Paris-based agency said in its report.
The IEA predicted slow recovery from the aviation sector due to persisting travel restrictions. Demand for gasoline is also expected to lag behind pre-pandemic levels as people continue to work from home and countries make the switch to sustainable mobility, such as electric cars and energy-efficient vehicles.
The agency expects Opec+, the supergroup led by Saudi Arabia and Russia to meet global demand for crude.
The exporters' group, which plans to add 2 million bpd of output back to the markets, will still have an effective spare capacity of 6.9 million bpd despite the increases.
Non-Opec supply meanwhile is expected to reach 1.6 million bpd in 2022 from 700,000 bpd this year.
"The US leads 2022 gains, adding more than 900,000 bpd to total supply, followed by Canada, Brazil and Norway. That leaves non-Opec+ output well above 2019 levels," the report said.
Oil prices rose to multi-year highs, and were trading above $70 per barrel following the release of the report.
Brent, the international benchmark, was up 0.43 per cent, trading at $72.83 per barrel at 8.50pm UAE time. West Texas Intermediate, which tracks US crude grades, was up 1.11 per cent.
"When the IEA is going out with a report saying that more oil needs to be produced by Opec+ to meet the oil demand recovery of 2022, the market can’t ignore the clearly bullish signal," said Louise Dickson, oil markets analyst at Rystad Energy.
"There is definitely room for Opec+ to boost output from the second part of this year and as long as this doesn’t happen, there is a definite upside for oil prices," she added.
