The International Energy Agency (IEA) said this week that global oil demand will fall by the highest amount ever in 2020 due to the economic lockdowns and inactivity forced by international measures to contain the CCP (Chinese Communist Party) virus, commonly known as the novel coronavirus.
The IEAs Oil Market Report for April states that global oil demand will likely fall by 9.3 million barrels per day (mmbd) in 2020 compared to the year before. The market in April and May will be particularly hard hit with demand down 29 and 26 mmbd, respectively. However, deliveries are expected to recover slowly after that—depending on how quickly economies can reopen.
The oil market remains saturated—Refinery runs plunge, while “#gasoline inventories reached uncharted territory and #oil #inventories see their biggest weekly jump in history,” said @mattvsmith01 our director of #commodity researchhttps://t.co/au4ZZaepsl
— ClipperData (@ClipperData) April 16, 2020
Worryingly for the industry, the IEA also projects that collapsing demand across global markets will mean that despite recent cuts in production by the OPEC+ bloc of oil producers, second-quarter oil inventories could build at a “massive” rate of some 17.4 mmbd, putting enormous pressure on tank farm and Strategic Petroleum Reserve capacities.
“We may see it was the worst year in the history of global oil markets,” said IEA Executive Director, Fatih Birol, who called on all oil-producing nations to take measures to “flatten the curve of the stock build-up.”
The plunge in demand would be even more damaging for the industry without the historic recent steps announced by OPEC+ & G20 countries.
They should lower the peak of the supply overhang & flatten the curve of the stock build-up. Demand may exceed supply in the 2nd half of 2020. pic.twitter.com/ILl9RtZ5LJ
— Fatih Birol (@IEABirol) April 15, 2020
Meanwhile, the U.S. Energy Information Administration (EIA) confirmed that crude stocks in the United States had built at a rate of 19 mmbd in the last week.
The 2019 novel coronavirus disease (#COVID19) pandemic has caused significant changes in #energy fuel supply and demand patterns globally. Read more in #ThisWeekInPetroleum. https://t.co/bgxBtwW1b4 #oil #gasoline pic.twitter.com/Vzn6P6G6ZF
— EIA (@EIAgov) April 13, 2020
OPEC Cuts Demand Forecasts
In its April report released this week, the Vienna, Austria-based Organization of the Petroleum Exporting Countries (OPEC) was somewhat more optimistic than the IEA, but still expects a fall in global demand of 6.9 mmbd in 2020. OPEC stated that it believes the U.S. economy will “contract by 4.1 percent in 2020, following growth of 2.3 percent in 2019.” The organization expects an even greater economic decline of 6 percent across the Eurozone countries.
OPEC said that the “Benchmark oil prices plunge prompted companies to respond by cutting capital expenditure to the lowest in 13 years,” while the cartel expects that oil supply will only grow in Norway, Brazil, Guyana, and Australia this year.
Crude prices have fallen over 60 percent this year due to a price war between Saudi Arabia and Russia and the economic fallout from the CCP virus crisis. Spot prices for benchmark West Texas Intermediate (WTI)—a light, sweet crude favored by refiners on the U.S. Gulf Coast—reached a low of $14.10 on March 30, before recovering to end trading at $19.87 on Thursday. WTI had been trading around the $61 mark at the beginning of January.
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