The International Energy Agency (IEA) just released its latest oil market forecast, expecting the global oil demand to decline this year as the impact of the new coronavirus (COVID-19) spreads around the world, constricting travel and broader economic activity.
According to the IEA, the situation remains fluid, creating an extraordinary degree of uncertainty over what the full global impact of the virus will be. In IEA’s central base case, demand this year drops for the first time since 2009 because of the deep contraction in oil consumption in China, and major disruptions to global travel and trade.
The short-term outlook for the oil market will ultimately depend on how quickly governments move to contain the coronavirus outbreak, how successful their efforts are, and what lingering impact the global health crisis has on economic activity.
“The coronavirus crisis is affecting a wide range of energy markets – including coal, gas and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels,” said Dr Fatih Birol, the IEA’s Executive Director.
Dr Birol continues, “This is especially true in China, the largest energy consumer in the world, which accounted for more than 80% of global oil demand growth last year. While the repercussions of the virus are spreading to other parts of the world, what happens in China will have major implications for global energy and oil markets.”
For 2020, IEA now sees global oil demand at 99.9 MMboe per day, down around 90,000 barrels per day from 2019. This is a sharp downgrade from the IEA’s forecast in February, which predicted global oil demand would grow by 0,825 MMboe per day in 2020.