IEA Sees Oil Demand Shrink

Global oil demand is expected to decline in 2020 as the impact of the new coronavirus (Covid-19) spreads around the world, the International Energy Agency (IEA) said as it revised its outlook March 9.

The new outlook comes as the world's biggest state producer Saudi Aramco said it would cut prices and go for market share, as the Opec+ alliance with Russia that aimed to keep a lid on output ended in acrimony March 6.

Standing at 99.9mn barrels/day, the new demand figure is around 90,000 barrels/day less than in 2019. In February, the IEA predicted global oil demand growth of 825,000 b/d. It said: “the situation remains fluid, creating an extraordinary degree of uncertainty over what the full global impact of the virus will be.” 

In the IEA’s central base case, demand this year drops for the first time since 2009 because of the deep contraction in oil consumption in China, and major disruptions to global travel and trade. 

“The coronavirus crisis is affecting a wide range of energy markets – including coal, gas and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels,” said IEA boss Fatih Birol. “This is especially true in China, the largest energy consumer in the world, which accounted for more than 80% of global oil demand growth last year. While the repercussions of the virus are spreading to other parts of the world, what happens in China will have major implications for global energy and oil markets.” 

To account for the extreme uncertainty facing energy markets, the IEA has developed two other scenarios for how global oil demand could evolve this year. In a low case, global measures fail to contain the virus, and global demand falls by 730,000 b/d in 2020. In a high case, the virus is contained quickly around the world, and global demand grows by 480,000 b/d.