IEA predicts 'worst year in history' of oil sector

Demand to plummet by record 9.3m barrels per day for the year

Afp April 15, 2020
Demand to plummet by record 9.3m barrels per day for the year. PHOTO: REUTERS

PARIS: The coronavirus outbreak will slash global oil demand in 2020 to erase a decade of growth and set up "the worst year in the history" of the sector, the International Energy Agency (IEA) said on Wednesday.

Demand is projected to plummet by a record 9.3 million barrels per day (mbd) for the year as a whole, with 29mbd in the month of April, and 26mbd in May – "staggering numbers", according to the agency's executive director Fatih Birol.

"I believe in a few years' time, when you look at 2020 we may well see that it was the worst year in the history of global oil markets," he told reporters on a teleconference.

"During this terrible year, the second quarter may very well be the worst of the lot and...April may very well be the worst month."

The projected figures for this month were last seen in 1995, said Birol, describing this as "Black April in the history of the oil industry."

The IEA said measures taken by the OPEC+ group and other oil producing nations to cut output should allow demand to start exceeding supply again by the second half of 2020, assuming population lockdowns to curb virus spread are lifted.

"Once the declines in oil demand start to reduce and once the impact of the production cuts from the OPEC+ agreement and non-OPEC producers start to bite, we start to see a recovery in the second half of the year," Neil Atkinson, head of the agency's oil division, told the briefing.

"But obviously there's still a long way to go before we reach that point."

In total, producers have undertaken to cut supply by about 12 million barrels a day in May, Atkinson said, including 9.7mbd pledged by the OPEC+ group.

G20 countries have agreed to support the OPEC+ cuts.

The combined effort "takes us right back to below 90mbd a day which is a level of production for the world which we haven't seen since back in 2011," said Atkinson.

On Tuesday, the International Monetary Fund (IMF) said the coronavirus pandemic was pushing the world into its deepest recession in a century, with economic output expected to shrink 3%.

This means that "COVID-19 results in one year of growth loss of the global economy and almost a decade of growth lost in global oil markets," added Birol.

"The volatility we are seeing in oil market is detrimental to the global economy at a time that we can least afford it."

Oil prices extended their slump Wednesday, with WTI hitting the lowest level since 2002 as the output cuts were deemed not enough.

The benchmark WTI contract tumbled to $19.20 per barrel, the lowest level in 18 years.


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