Global oil demand set to fall as coronavirus recovery stalls
The International Energy Agency (IEA) today reduced its forecast for global oil demand for the year, saying that the continued uncertainty caused by coronavirus shows little sign of abating.
Oil markets have been rocked by unprecedented volatility this year, with the near-total shutdown of air travel and other restrictions on economic activity sending demand plunging.
Although some demand has returned due to the easing of lockdown measures, the Paris-based organisation today confirmed that the recovery was now stalling.
For the year as a whole, it said that demand for the commodity would fall by an average 8.4m barrels per day, higher than it had previously forecast.
At 91.7m barrels per day, demand has returned to its level in 2013, the IEA said.
It also added that the already “fragile” situation could worsen with the onset of the winter period.
“With the on-coming northern hemisphere winter, we will enter uncharted territory regarding the virulence of Covid-19”, it said.
“In last month’s report, we said that the market was in a state of “delicate re-balancing”. One month later, the outlook appears even more fragile.”
The new analysis comes after oil producer group Opec yesterday forecast that demand would shrink an extra 400,000 barrels a day.
In its new estimate, demand is due to fall 9.4m barrels per day over the whole year.
The group is due to meet this month to discuss whether to take further steps to prop up the market. Currently, it has put in place production curbs of 7.7m barrels per day.
According to Bjornar Tonhaugen, Rystad Energy’s head of oil markets, the group might be mulling further action against producers which did not comply with previous curbs.
“There is also anticipation that there may be a reaction to members that have failed to live up to their word and compensate for the cuts they did not make in previous months”, he said.