LONDON: In this file photo, a Shell service station is reflected in a puddle in London. Anglo-Dutch oil giant Shell will invest up to $6 billion (4.9 billion euros) per year in green energy after its oil output peaked in 2019, the group said yesterday.-AFP

PARIS: The International Energy Agency warned yesterday the world oil market remains fragile, despite a recent recovery in prices, as tighter restrictions are imposed to curb more contagious coronavirus variants. At the same time, the IEA said the economic outlook was brighter overall, especially in the second half of this year.

"The rebalancing of the oil market remains fragile in the early part of 2021 as measures to contain the spread of COVID-19, with its more contagious variants, weigh heavily on the near-term recovery in global oil demand," the IEA said in its latest monthly report. "But fresh support has been provided by a more positive economic outlook for the second half of the year, along with a pledge from OPEC+ to hasten the drawdown of surplus oil inventories," it added.

OPEC producers plus their non-cartel allies, principally Russia, have stuck to hard-won output limits, driving prices back to around $60 per barrel, levels last seen early last year before the pandemic took hold. The IEA noted that in January, the International Monetary Fund had raised its global growth forecast for this year to 5.5 percent from 5.2 percent, largely due to "the robust recovery in manufacturing activity and stronger growth expectations for the United States."

In Europe, however, the outlook was weaker, it noted. "Renewed lockdowns, stringent mobility restrictions and a rather slow vaccine rollout in Europe have delayed the anticipated rebound until the second half of the year," it said. The IEA said it had left its 2021 global oil demand forecast unchanged, at 96.4 million barrels per day (mbd), which represents a gain of 5.4 mbd over 2020. It added however that "the forecasts for economic and oil demand growth are highly dependent on progress in distributing and administering vaccines, and the easing of travel restrictions in the world's major economies."

Shell initiative

Energy giant Royal Dutch Shell declared yesterday that its oil output is locked in decline after peaking in 2019 as it outlined green plans to switch away from fossil fuels. The London-listed company will invest up to $6.0 billion (4.9 billion euros) per year in green energy products such as biofuels, electric car charging and renewables, it said in a strategy update.

The group said it anticipates a "gradual reduction" in oil output of 1.0-2.0 percent each year, including divestments. Total carbon emissions for the company peaked in 2018, it added. The global oil sector, nursing vast losses due to the COVID-19 pandemic, is accelerating plans to switch into greener energy and slash carbon emissions in the face of with intensifying climate change fears.

"Our accelerated strategy will drive down carbon emissions and will deliver value for our shareholders, our customers and wider society," Shell chief executive Ben van Beurden said yesterday. "We must give our customers the products and services they want and need-products that have the lowest environmental impact. The sector's transition demands big investments at a time when oil majors are looking to make sizeable savings and axe thousands of jobs.

Yesterday's update came one week after Shell posted huge annual losses as the coronavirus pandemic slashed energy demand and prices in 2020. After lockdowns began to spread towards the end of last year's first quarter, oil prices dropped off a cliff, even briefly turning negative. Prices have rebounded sharply however to 13-month highs, levels last seen just before the pandemic took hold.

Profits evaporate

Shell dived into a net loss of $21.7 billion (18.1 billion euros) last year as factories shut and planes were grounded. The loss compared with a net profit of $15.8 billion in 2019. Shell is axing up to 9,000 jobs in a cost-cutting drive to combat the turmoil, which is mirrored elsewhere in the sector. British rival BP, which is cutting around 10,000 positions, reported a 2020 net loss of $20.3 billion.

US giant Exxon Mobil suffered an annual loss of $22.4 billion. French peer Total on Tuesday said it was changing its name to TotalEnergies to reflect a move away from fossil fuels, alongside news it had posted a $7.2-billion net loss last year. Gigantic sector-wide losses have meanwhile sparked concern over plunging tax revenues for countries across the world leading to a major shortfall in budgets. Oil and gas producing nations face up to nine trillion dollars in lost income as the world accelerates the transition to renewables, according to research published Thursday by the Carbon Tracker industry watchdog. - AFP