Oil Could go Lower as Demand Drops: IEA

Global oil demand may fall about 20mn b/d, or 20% year on year, in 2020 thanks to the imposed lockdown around the world, the head of the International Energy Agency (IEA) Fatih Birol said. However he told a news conference March 26 that this initial estimate was based on the IEA's analysis of early data and it would be revised when the next oil market report is published in a few weeks.

According to IEA, transport accounted for about a quarter of global energy demand last year. This year governments have taken tight measures in repsonse to Covid-19, including massive lockdowns of the civilian population worldwide, affecting most people who would normally be driving to work, boarding an aircraft and so on. 

Birol says for the first time in decades falling oil demand has coincided with huge oversupply. According to him, the price could go as low as $20/barrel.

According to the statistics of energy intelligence firm Kpler, onshore and floating crude oil storage facilities hold 4.42bn barrels, a level that surpasses the previous peak realized in early-2017.

The Brent crude oil benchmark price dropped 7.2% March 27 to $24.45/barrel. At this price, according to Wood Mackenzie’s estimates, a tenth of global oil production becomes unprofitable. If it plunges to $15, then a quarter of the global supplies would be unprofitable.