Oil Demand Projections Get Worse, Putting Additional Pressure On Prices

Marco Green
March 27, 2020

Demand for oil products, especially jet fuel, is falling worldwide as more governments announce nationwide lockdowns to stop the spread of coronavirus.

Oil prices fell on profit taking Thursday after three days of gains, helped by the Federal Reserve's sweeping stimulus measures and optimism surrounding a US $2 trillion emergency stimulus plan.

United States benchmark West Texas Intermediate was down 1.5 percent, changing hands for about $24 a barrel, while worldwide benchmark Brent crude was down 0.4 percent at around $27 a barrel.

Brent crude futures fell $1.04, or 3.75%, to $26.35 a barrel. Inventories rose by 1.95 million barrels during the previous week.

The data showed gasoline inventories fell by 1.5 million barrels, more than twice the expected drop, while distillate stockpiles were lower by about 680,000 barrels, compared with an expected drop of 1.9 million barrels.

But with demand disappearing and output rising, the outlook is bleak.

According to data from the U.S. Energy Information Administration (EIA), world oil production totaled 100.6 million bbl/day in 2019, while consumption was 100.75 million bbl/day.

US senators and Trump administration officials have reached an agreement on a $2 trillion stimulus bill that congress was expected to pass on Wednesday.

This oil price war could raise global oil production by more than 2.5m barrels of oil a day, which would outpace demand for crude by 6m barrels of oil a day, according to Rystad - which estimates the world has about 7.2bn barrels of crude and products in storage.

"All indexes pointed to worsening conditions among oil field services firms", the Fed said in its report, noting that the business activity index plunged from -4.2 in the fourth quarter to -50.9 in the first, the lowest reading in the survey's four-year history.

The lack of storage room will lead to the global oil industry to look for alternative places to store the extra crude. While oil producers such as OPEC and Russian Federation might try to offset that with production cuts, "We expect a demand shock of this magnitude to overwhelm any supply response", the Goldman analysts say.

The world does not need all this oil.

Other reports by Click Lancashire

Discuss This Article

FOLLOW OUR NEWSPAPER