Oil demand is set to rise at its fastest pace in 40 years - but its peak is less than 10 years away, says BofA

• Bank of America expects higher oil demand starting in 2021, with consumption increasing at the fastest pace since the 1970s.
• The greater need for oil worldwide is likely to be driven by a recovery in sea transportation.
• Demand for oil should be capped by around 2030 as more people buy electric vehicles.

Demand for oil worldwide is on course for its swiftest pace of growth in four decades but demand also looks set to peak in 2030 as more people buy electric vehicles, Bank of America analysts projected.

The COVID-19 pandemic stoked a collapse in demand by nearly 9 million barrels of oil a day in 2020, but a pickup in transportation needs is primed to accelerate consumption starting this year through 2023.

"Should our expectations play out, this would be the fastest 3- year pace of growth since the 1970s in absolute volumes," said strategists led by Francisco Blanch, head of global commodities research at BofA Merrill Lynch, in a note published Friday.

Demand is poised to be "front-loaded" in 2021, with an increase by 5.3 million barrels a day, drifting back to 2.8 million barrels a day in 2022 and rounding off with a rise of 1.4 million barrels a day in 2023.

Global transportation will support demand prospects for the commodity, with BofA saying it expects sea transport to fully recover to 2019 levels, "an assumption consistent with the limited importance of passenger traffic in the high seas," the report said.

"The biggest delta to our projected oil demand recovery scenarios comes from aviation fuel demand," which BofA expects at 80% in its fast-recovery projection. That would be behind 96% for its road projection and 100% for sea.

The firm said it's "relatively optimistic" about road-transportation recovery, noting a rebound in car sales globally after a slide in the second quarter of 2020 when populations around the world went into lockdown to slow the spread of coronavirus.

In terms of cars, the wider adoption of electric vehicles should "trigger" the peak of global oil demand around 2030 as "improving economics of EVs speed up a big rotation" toward them, said BofA. Its base case has sales of EVs reaching 34% of total car sales by 2030. Sales of EVs should overtake sales of internal combustion vehicles by 2035, it said.

Even as there have been rallies in shares of electric vehicle makers lately, EVs "do not present an imminent danger to oil demand," partially because the demand for them has been "significantly slower" during the past few quarters in the US and China. Subsidies and mandates in Europe, meanwhile, have helped sales.