Oil company Baker Hughes is ‘cautiously optimistic’ on the outlook for energy demand

Oil services firm Baker Hughes sees energy demand recovering in the second half of 2021, chief executive Lorenzo Simonelli said this week.

“We are cautiously optimistic,” he told CNBC’s Steve Sedgwick on Monday.

He noted that some countries are still in coronavirus-related lockdowns, which decimated demand in 2020 and can weigh on fuel sales in the first part of the year.

However, he expects demand to start recovering in the second half of the year, due to the vaccine rollout and improving economic situation.

The chief executive’s views were in line with OPEC’s January report on the oil market, which said vaccinations provide some “upside optimism,” and that its 2021 forecasts “assume a healthy recovery in economic activities.”

The alliance expects global oil demand to increase by 5.9 million barrels per day to an average of 95.9 million bpd.

Meanwhile, the International Energy Agency predicts that world oil demand will recover to 96.6 million bdp this year. It lowered its forecast slightly citing surging Covid cases and fresh lockdowns.

While vaccines put fundamentals on a stronger growth trajectory, it will take more time for demand to fully recover, the IEA said.

Simonelli said there would be “pockets of opportunity” for investment as the recovery takes place.

“It’s going to be different in different locations geographically,” he said. “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.”

Brazil and Norway could also increase production in the second half of 2021, he added.

U.S. shale producers, however, are likely to be “subdued,” he said. “There’s a lot of capital discipline, [and] obviously we’re undergoing an energy transition as well.”

He said North America historically would increase volumes quickly, but that could change this time.

“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,” he said.

U.S. West Texas Intermediate futures were up 0.99% at $54.08 on Tuesday afternoon in Asia, while international benchmark Brent crude futures rose 0.89% to trade at $56.85.