The International Energy Agency expects crude oil demand this year to be 8.1 million bpd lower than it was in 2019, a downward demand forecast revision of 140,000 bpd, the authority said in its latest Oil Market Report.
“Global oil demand is expected to be 91.9 mb/d in 2020, down 8.1 mb/d y-o-y. In this Report, we reduce our 2020 forecast by 140 kb/d, the first downgrade in several months, reflecting the stalling of mobility as the number of Covid-19 cases remains high, and weakness in the aviation sector,” the IEA said.
A day earlier, OPEC also had bad news for the oil industry, admitting that demand this year would be weaker than it expected previously. It was, in fact, even more pessimistic than the IEA, estimating demand loss for the year at 9.1 million bpd.
In its closely watched Monthly Oil Market Report published on Wednesday, OPEC now forecasts that the global economy will shrink by 4.0 percent this year, more than the 3.7-percent economic drop expected in the July forecast, due to the additional negative impact of the pandemic.
The IEA, for its part, has named slack jet fuel demand as one of the main factors for its lower oil demand forecast alongside the still-considerable uncertainty surrounding the rate at which Covid-19 is spreading, noting it remains unclear as of yet whether there will be a second global wave of infections or the recovery will continue.
This uncertainty has also led the authority to downgrade its gasoline demand projections for the second half of the year. In diesel, the IEA has seen a steady recovery as industrial activity and freight transport recover after the end of widespread lockdowns.
Supply, meanwhile, is on the rise, adding 2.5 million bpd in July after Saudi Arabia reversed its voluntary additional 1-million-bpd cuts and the UAE failed to stick to its OPEC+ production quota. Production in the United States also began recovering last month, pushing the world’s total higher, the IEA said.
By Irina Slav for Oilprice.com
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Still, the IEA's projection about global oil demand is pessimistic given China’s roaring crude oil imports, the steep decline of 6.3 million barrels a day (mbd) in US oil output this year so far and the slow but sure decline in the glut in the market.
Contrary to IEA’s projection, I project that global oil demand this year will hit 96 mbd, just 5 mbd less than 2019 level of 101.0 mbd and not 8.1 mbd as the IEA is forecasting.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London