IEA Sees First Global Oil Demand Drop in a Decade

Marco Green
February 14, 2020

US Energy Secretary Dan Brouillette told Reuters the coronavirus epidemic in China has had a marginal impact on energy markets and is unlikely to dramatically affect oil prices even if Chinese demand falls by 500,000 barrels per day.

"The impact of the coronavirus outbreak on China's economy has added to the uncertainties surrounding global economic growth in 2020, and by extension global oil demand growth in 2020", it said.

While the IEA still expects demand for oil to grow for this year as the outbreak is contained, it slashed its forecast for the increase in global consumption by almost a third to 825,000 barrels per day, the smallest increase since 2011.

The impact on demand for transportation fuels was exacerbated by the outbreak coinciding with the Lunar New Year holidays, when many Chinese return home to celebrate with family.

While the brief SARS epidemic of 2003 has at times been used as a reassuring point of comparison, China's economy has changed enormously since then. That would mark the first quarterly decline since the financial crisis in 2009.

"The effect of the Covid-19 crisis on the wider economy means that it will be hard for consumers to feel the benefit of lower oil prices", the report concludes. Now management expects the oil production in the United States in 2020 will increase by 960 thousand barrels per day to a record 13.2 million barrels per day.

They are now considering an additional cut of 600,000 barrels per day to compensate for the drop in demand due to COVID-19.

"The main reason behind the oil demand growth revision and hence the demand for OPEC crude, is the outbreak of the Coronavirus and its expected impact on China's oil demand and, by extension, global oil demand", OPEC's Monthly Oil Market Report said.

However, the Organization of the Petroleum Exporting Countries and its allied producers, known as OPEC+, are considering cutting output by up to 2.3 million barrels per day in response to the demand slump.

Wednesday's report comes after OPEC members and their allies, including Russian Federation, last week were unable to reach an agreement to deepen production cuts.

Other reports by Click Lancashire

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