June 14, 2021

The IEA foresees a historical collapse in oil demand throughout 2020


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The Covid-19 pandemic and the restrictions implemented to contain the disease will cause a historic collapse in world demand in 2020, with an average drop of 9.3 million barrels per day (mbd) in 2020, «The worst year in the history of the oil market», which means practically erasing all the growth registered in the last decade, according to the International Energy Agency, which has appreciated the recent efforts of OPEC + and the G20 to stabilize the market.

In this way, the new forecasts of the agency attached to the Organization for Economic Cooperation and Development (OECD), indicate that global oil demand will reach an average of 90.5 mbd, its lowest level since 1995.

According to the IEA calculations, after the drop of 10.8 mbd observed in March, the world demand for crude oil will fall in the month of April in a record of 29 mbd Compared to the same month of 2019, while in May the interannual decrease will be 25.8 mbd and 14.6 mdb in June.

Thus, for the second quarter as a whole, the IEA estimates that world oil consumption will decrease by an average of 23.1 mbd compared to the same period in 2019.

“If we look at the forecasts published yesterday by the International Monetary Fund, we see a recession that represents a year of lost growth and in the oil market the fall of 9.3 mbd is practically a lost decade,” he said in a press conference. telematics the director of the IEA, Fatih Birol.

“In a few years, when we look back, we will see that 2020 has been the worst year in the history of the oil market and, specifically, the second quarter will be the worst quarter in history. Within that worst quarter, April will be the worst month in history. It is a ‘black April’ », said the IEA leader.

On its side, assuming the relaxation of restrictions in the second semester, the IEA warns that the recovery of demand will be very gradual throughout the second half of 2020. In fact, in December 2020, world demand for oil still It will be 2.7 mbd less than the previous year.

“Our assumption is that containment measures will begin to relax and demand will begin to recover very gradually. Thus, between now and the end of 2020, the demand for oil in each month will be lower than that registered in each month of 2019, “said Birol.

Regarding recent adjustment measures agreed by OPEC +, which will begin cutting production by 9.7 mbd from May, and which the IEA is confident will incorporate an adjustment of more than 3.5 mbd by the United States, Canada, Brazil and Norway, the agency has underlined that they will not be enough to compensate for the collapse in demand, although they serve to avoid a greater impact.

“There is no feasible agreement that can reduce supply enough to compensate for the loss of demand in the short term,” acknowledged the IEA, for which, however, they are a solid start and “have the potential to start reversing. the accumulation of stocks as the second half of the year progresses. “

In this way, the world crude oil supply could be reduced in May by a record 12 mbd, although the effective adjustment will be about 10.7 mbd due to the high production in April, according to the IEA, with a drop for the group of 2020 of 2.3 mbd, although in the last part of the year the adjustment would be about 5 mbd. Thus, the agency calculates that the global supply of oil will be below the threshold of 90 million barrels per day for the first time since 2011.

In this sense, the director of the IEA has warned that “this is a black April because demand continues to drop, while production will continue to grow during these two weeks”, so, despite being grateful for the effort to get to the point , he regretted that “valuable time is being lost”.

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