DEMAND for oil is likely to be even lower than expected this year amid signs the recovery from the slump triggered by the coronavirus crisis has stalled, experts have warned.
The International Energy Agency said it had cut its forecast for demand for the first time in several months to reflect concerns about the outlook for activity around the world.
“We reduce our 2020 forecast by 140,000 barrels per day (bpd) … reflecting the stalling of mobility as the number of Covid-19 cases remains high, and weakness in the aviation sector,” said the IEA.
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The Paris-based watchdog’s assessment of the prospects for demand will be regarded with concern in the oil and gas industry as firms grapple with the impact of sharp falls in commodity prices triggered by the coronavirus crisis.
The IEA said the market would remain in a delicate state due to ongoing uncertainty around demand caused by Covid-19 and the prospect of supplies increasing, as curbs agreed by major exporters are eased.
Moves by many countries to ease restrictions on movement had fuelled a recovery in demand following the sharp drop that was caused by the imposition of lockdowns around the world.
However, the IEA noted that following a resurgence in coronavirus cases social distancing measures are being reintroduced in many countries along with some localised lockdowns.
“It remains to be seen if the increase in cases heralds a second wave or it is merely a regular fluctuation that we will see over time,” said the IEA.
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Brent crude traded down $0.18 per barrel yesterday afternoon, at $45.25/bbl. The price fell from around $70/bbl in January to an 18-year low of $15.98/bbl in April. It recovered some ground after lockdown measures were eased and major exporters agreed to implement record production cuts to support the market.
The IEA now expects global oil demand to total 91.9 million barrels daily (mb/d) in 2020, down 8.1 mb/d on last year.
The agency said it had cut its forecast for oil demand in 2021 by 240,000 barrels per day, to 97.1 m/bd, “mainly due to aviation sector weakness”.
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