After on Friday OPEC slashed its oil demand outlook for this year by 230,000 bpd, the Energy Information Administration followed, revising its global oil demand forecast by as much as 378,000 bpd on the back of the Chinese coronavirus outbreak.
The authority said it expected the outbreak to reduce China’s oil demand by some 190,000 bpd this year due to travel restrictions prompted by the outbreak.
OPEC last Friday said it expected global oil demand to rise by 990,000 bpd this year, most of which will come from non-OECD countries. OECD demand, the cartel said in its February edition of its Monthly Oil Market Report, will grow by a modest 100,000 bpd.
The International Energy Agency went further: it warned that global oil demand will actually take a dip during the first quarter of the year because of the coronavirus outbreak. The dip will be significant, the IEA said, at 435,000 bpd, representing the first contraction in demand in a decade.
As for the rest of the year, the IEA said it expected demand to grow by 825,000 bpd, a downward revision close to that made by the EIA, at 365,000 bpd.
These updates should be worrying for oil producers even though some observers are already talking about a quick recovery.
OPEC’s efforts to prop up prices have run into the coronavirus effect and now their best hope is that Libya’s production does not begin to recover anytime soon.
In the United States, shale producers are facing billions in looming debt repayments this year and during the next three, combined with a growing cautiousness on the part of banks to provide fresh financing.
Even so, prices have recouped some of the loses they suffered earlier this month from news that Chinese refiners are shrinking their run rates, with Brent crude climbing closer to $60 this week and West Texas Intermediate at over $53 a barrel.
By Irina Slav for Oilprice.com
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