Due to the coronavirus outbreak weighing on economic growth, OPEC now sees global oil demand rising by mere 60,000 bpd in 2020 after it has slashed its forecasts by 920,000 bpd from last month’s assessment.
In its closely watched Monthly Oil Market Report (MOMR) published on Wednesday, OPEC said that the near-zero growth projection for this year reflects slower global economic growth as a result of the spread of Covid-19 outside China.
The cartel now expects global economic growth at 2.4 percent this year, down from a forecast of 3.0-percent growth in last month’s report.
“The tremendous impact that the Covid-19 outbreak had so far on economic growth has significantly impacted oil demand growth in 1Q20 and therefore led to a downward revision to show less than 0.1 mb/d growth for the entire year 2020,” OPEC said in its MOMR today.
Last week, the cartel had already slashed once its estimates for oil demand growth, saying that demand was expected to grow by 480,000 bpd in 2020, compared to expectations of 1.1-million-bpd growth in December.
Earlier this week, the International Energy Agency (IEA) warned that oil demand was set to drop this year for the first time since the financial crisis in 2009, due to the coronavirus outbreak and its impact on economies. The IEA now sees global demand falling by 90,000 bpd year on year in 2020.
OPEC, for its part, said today that the Covid-19 outbreak and its adverse impacts on transportation and industrial fuels were the main factors prompting the cartel to expect nearly zero growth in oil demand this year, compared to initial forecasts of more than 1.1 million bpd growth. Related: Don't Be Fooled By The Oil Price Rebound
“Considering the latest developments, downward risks currently outweigh any positive indicators and suggest further likely downward revisions in oil demand growth, should the current status persist,” OPEC warned.
On the supply side, OPEC expects non-OPEC supply growth at 1.8 million bpd this year, down by 500,000 bpd from the previous projection, mainly reflecting a further slowdown in US shale production.
The most recent oil price collapse will hurt future production in the U.S. and Canada, OPEC said, while “most oil exporters from the Middle-East and Africa have production costs, that are much lower than the current oil price level and therefore, their production level could be largely maintained.”
“The recent decline in oil price could not have happened at a worse time, as the Covid-19 outbreak has wiped out global oil demand growth for 2020 and caused a strong negative global economic impact, which is expected to continue and worsen if the virus is not controlled,” OPEC said.
Without mentioning the collapse of the OPEC+ talks last week, which triggered the price collapse and the all-out oil price war, OPEC noted that “The impact of the Covid-19 related developments on an already fragile global economic situation is quite challenging and requires coordinated global policy action of all market participants.”
By Tsvetana Paraskova for Oilprice.com
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