IEA: Coronavirus weighs on global oil demand

Cornelia Mascio
Agosto 14, 2020

Projections about global oil supply are more complex and are heavily influenced by the actions of the Organization of the Petroleum Exporting Countries, or OPEC. The producer group remains more pessimistic than the IEA about the recovery in demand over the rest of this year - it sees consumption down year on year by over 1 million barrels a day more than the IEA does in the second half of 2020.

The International Energy Agency (IEA) cut its 2020 oil demand forecast on Thursday, warning that reduced air travel due to the coronavirus pandemic would lower global oil demand this year by 8.1 million barrels per day (bpd).

Jet fuel demand remains a major source of weakness, as the number of aviation kilometres travelled in July was still 67 per cent lower than past year. Demand has been above supply since June, and as OPEC and its partners press on with output curbs, world inventories ought to deplete at a rate of about 4 million barrels a day in the last four months of the year.

The agency also revised down its 2021 global oil demand estimate by 240K barrels per day to 97.1M bpd.

"Recent mobility data suggest the recovery has plateaued in many regions, although Europe, for now, remains on an upward trend", the IEA said.

"For diesel, there is evidence that the recovery in business and industrial activity combined with ongoing growth in e-commerce are supporting trucking activity as more goods are delivered to customers", the agency said. This is expected to further depress oil prices and force oil producers to effect another round of cut in output.

An upsurge in Covid-19 cases has resulted in the IEA downgrading its outlook for gasoline for the remainder of the year. It was 80 per cent down in April.

"The aviation and road transport sectors, both essential components of oil consumption, are continuing to struggle", IEA said in the report.

On the whole, the global oil supply rose by 2.5 million barrels a day in July, as Saudi Arabia ended its voluntary production cuts.

Under the terms of that agreement, 20 countries agreed to cut their combined crude production by 9.7 million barrels a day from agreed baselines from May to July, reducing the size of the cut to 7.7 million barrels a day for the rest of 2020 and then to 5.8 million barrels during 2021 and the first quarter of 2022.

Undoubtedly, the fallout of the government-imposed restrictions to mitigate the spread of Covid continue: Royal Dutch Shell will permanently shut its 110,000 bpd facility in Philippines' Batangas province, one of only two oil refineries in the country; and Marathon Petroleum, the largest USA refiner by volume, plans to permanently halt processing at refineries in Martinez, California, and Gallup, New Mexico.

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