The International Energy Agency (IEA) says that even if worldwide COVID-19 travel restrictions were eased during the second half of 2020, they expect that global oil demand will fall by 9.3 million barrels per day this year, erasing almost a decade of growth.
This was revealed in the IEA’s Oil Market Report 2020’. Speaking on the effects of the global lock-down measures, the report said that the world economy is under pressure in ways not seen since the Great Depression in the 1930s.
“Businesses are failing and unemployment is surging. Confinement measures are in place in 187 countries and territories, and although they vary in scope, activity in the transportation sector has fallen dramatically almost everywhere,” the IEA said. “Even assuming that travel restrictions are eased in the second half of the year, we expect that global oil demand in 2020 will fall by 9.3 million barrels a day (mb/d) versus 2019, erasing almost a decade of growth.”
The OPEC partners and other countries agreed that they would be cutting production by 9.7 million barrels per day (b/d) in May and June, 7.7 million b/d for another six months, and then by 5.8 million b/d for a further 16 months.
The IEA said that the measures OPEC+ and the G20 countries announced will not rebalance the market immediately. It said however that by lowering the peak of the supply overhang and flattening the curve of the build-up in stocks, they help a complex system absorb the worst of this crisis, “whose consequences for the oil market remain very uncertain in the short term.”
The IEA said, “We forecast a drop in demand in April of as much as 29 mb/d year-on-year, followed by another significant year-on-year fall of 26 mb/d in May. In June, the gradual recovery likely begins to gain traction, although demand will still be 15 mb/d lower than a year ago.”
The agency does not believe that there is any feasible agreement that could cut supply by enough to offset such near-term demand losses. “However, the past week’s achievements are a solid start and have the potential to start to reverse the build-up in stocks as we move into the second half of the year,” the IEA said.