IEA Warns Oil Demand Recovery at Risk
(Bloomberg) -- The International Energy Agency bolstered its outlook for global oil demand, but warned that the recovery could be derailed by the resurgence of coronavirus.
A collapse in fuel consumption during the second quarter was slightly less severe than previously estimated, and demand should rebound sharply over the next three months as economic activity resumes, the agency said in a monthly report. Bloated inventories will diminish as OPEC and its allies persevere with vast production cuts, it predicted.
Yet a flare-up of the virus, which is raging across several U.S. states and re-emerging in Asia, is “casting a shadow over the outlook,” the IEA cautioned.
“The large, and in some countries, accelerating number of Covid-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside,” the IEA said. The Paris-based agency advises major economies on energy policy.
International oil prices have more than doubled from the lows reached in late April, trading just under $42 a barrel in London on Friday, as fuel use picks up and crude supplies are reined in.
The shockwaves of the coronavirus crisis are, however, still being felt.
Global oil demand is on track to slump by 7.9 million barrels a day, or about 8%, this year as lockdowns and the economic contraction reduce the need for products like jet fuel and gasoline. While still a record loss, it’s not as bad as anticipated last month, when the agency projected a drop of 8.3 million barrels a day.
The IEA boosted its demand assessment for the second quarter, the height of the crisis, by 1.5 million barrels a day –- though that still equates to a 17% drop in the period from the same point in 2019.
Going into the third quarter, worldwide consumption should now pick up by about 14% from the previous three-month period, with the revival in economic activity, to average 94.3 million barrels a day, according to the agency.
The demand rebound, coupled with strict output cutbacks by the Organization of Petroleum Exporting Countries and its allies alongside losses elsewhere, should temper some of the enormous inventory glut that piled up during the first half of the year.
Global oil supply dropped to a nine-year low of 86.9 million barrels a day last month as OPEC+ delivered all the curbs it promised, while investment cuts and reduced drilling hit output from the U.S. and Canada.
The 23-nation OPEC+ alliance, led by Saudi Arabia and Russia, has pledged unprecedented output reductions amounting to almost 10% of world supplies in a bid to rebalance markets and shore up prices. The coalition cut even more than promised in June as the Saudis made additional reductions to speed up the recovery process, the IEA said.
To contact the reporter on this story:
Grant Smith in London at gsmith52@bloomberg.net
To contact the editors responsible for this story:
James Herron at jherron9@bloomberg.net
Helen Robertson
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- Oman Sees Increasing Ship-to-Ship Transfers of Russian Oil Bound for India
- Ithaca Energy Studies Deal for Eni's UK Upstream Assets
- New China Climate Chief Says Fossil Fuels Must Keep a Role
- Falcon Oil Declares Commercial Flow Test Results for Shenandoah Well
- UK Oil Regulator Publishes New Emissions Reduction Plan
- Japan Failing to Meet Corporate Demand for Clean Power: Amazon
- PetroChina Posts Higher Annual Profit on Higher Production
- McDermott Settles Reficar Dispute
- Macquarie Strategists Expect Brent Oil Price to Grind Higher
- US, SKorea Launch Task Force to Stop Illicit Refined Oil Flows into NKorea
- Russian Navy Enters Warship-Crowded Red Sea Amid Houthi Attacks
- Pennsylvania County Joins List of Local Govts Suing Big Oil over Climate
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call
- India Halts Russia Oil Supplies From Sanctioned Tanker Giant
- DOI Announces Proposal for Second GOM Offshore Wind Auction
- Centcom, Dryad Outline Recent Moves Around Red Sea Region
- PetroChina Set to Receive Venezuelan Oil
- Czech Conglomerate to Buy Major Stake in Gasnet for $917MM
- US DOE Offers $44MM in Funding to Boost Clean Power Distribution
- Oil Settles Lower as Stronger Dollar Offsets Tighter Market
- UK Grid Operator Receives Aid to Advance Rural Decarbonization
- Chinese Mega Company Makes Major Oilfield Discovery
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Another Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Vessel Sinks in Red Sea After Missile Strike
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension
- Equinor Makes Discovery in North Sea
- Standard Chartered Reiterates $94 Brent Call