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Global Oil Demand To Fall To Levels Not Seen Since 2014

Crude oil demand this year will fall to around 90.6 million bpd this year, OPEC’s secretary-general Mohammed Barkindo said ahead of the next OPEC+ meeting, as cited by Trend.

This level of demand was last seen before 2014, when the oil market again swung into an oversupply and prices tanked as the Gulf producers fought U.S. shale.

“World oil demand growth in 2020 is expected to drop by a staggering 9.07 mb/d, with the worst impact seen in this quarter. We expect demand for the year to be around 90.59 mb/d – back to levels last seen before the 2014-2016 market downturn,” the top official said.

This is not good news because oil in storage remains high, according to the latest data from analytics firm OilX. Oil in floating storage has begun to be drained, OilX said, but oil in onshore storage was still rising in May. To date, total oil in onshore storage is above 4.5 billion barrels. Of this, some 1 billion barrels flowed into storage in the past couple of months and will take a lot longer to clear up.

The drawdown in oil stocks may accelerate as economies recover from the Covid-19 crisis, but since OPEC+ will tomorrow be discussing a one-month extension of its deepest production cuts, the sentiment in the cartel seems to be still largely bearish. However, Russia may be more optimistic: Energy Minister Alexander Novak said earlier this week that he expected the oil market to swing into a shortage in July.

Whatever happens, the effect of the crisis has already been devastating for the industry. Barkindo noted that investment in oil and gas could fall by as much as 23 percent this year from last, to about 50 percent of the record-high $741 billion invested in 2014. There will be bankruptcies and layoffs in what the official called a repeat of the 2014-2016 scenario.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on June 05 2020 said:
    Given the way the global oil demand is accelerating and given that the world’s three biggest crude oil consumers, namely China, the United States and India, are already approaching pre-coronavirus oil demand levels, OPEC’s secretary-general Mohammed Barkindo’s assessment of global oil demand in 2020 can’t be right.

    Between them these three countries account for 40% of global oil demand. Even if demand by the rest of the world accounting for 60% of the total declines by 5% as a result of the coronavirus outbreak, this means that total global oil demand in 2020 could amount to 98.30 million barrels a day (mbd) compared to 101.34 mbd in 2019. This amounts to a decline of 3 mbd in 2020 and not 10.74 mbd as OPEC’s Secretary-general is projecting.

    Even Russia’s Energy Minister Alexander Novak is saying that he expected the oil market to swing into a shortage in July.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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