• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 17 hours How Far Have We Really Gotten With Alternative Energy
  • 23 hours Bad news for e-cars keeps coming
  • 9 days For those of you who are full of __it.

IEA: OPEC Can’t Save The Oil Market

Even if the OPEC+ group and other major oil producers in the world were to agree to deep production cuts, they would be unable to prevent what is sure to be an enormous global inventory build this quarter due to unprecedented demand destruction, Fatih Birol, Executive Director of the International Energy Agency (IEA), told Reuters on Friday.

The measures many countries have taken to try to flatten the curve of the coronavirus pandemic are destroying unprecedented volumes of oil demand as more than 3 billion people—from India to Europe to the United States—remain in lockdown.

As a result of restricted commuter travel, grounded flights, and economic slowdown, demand for oil in April is expected to drop by 20 million bpd year on year, and probably more.

Even if OPEC+ plus other producers were to discuss, agree to, and implement a collective cut of 10 million bpd, global oil inventories would still rise by 15 million bpd in the second quarter, the IEA’s chief told Reuters.  

Earlier this week, the IEA said that the world has seen some oil shocks before, but “none has hit the industry with quite the ferocity we are witnessing today.”

The reason the shock is unique this time around, the IAE says, is because one of the usual stabilization factors, consumers, is unable to do its part. As billions of people around the world are still in lockdown, consumers are unable to react to falling prices like they usually do—by consuming more. So for as long as the pandemic lasts, boosts in demand that were seen during other oil shocks are “highly unlikely.”

Meanwhile, producers from the OPEC+ group and from another group are expected to discuss potential ways to react to the massive demand loss and the low oil prices that hit their lowest level in 18 years earlier this week.

While U.S. President Donald Trump touted a cut of 10 million bpd, and possibly 15 million bpd, many oil analysts, cited by Reuters, remain highly skeptical that an agreement of these proportions could be reached and implemented.


By Tsvetana Paraskova for Oilprice.com

More Top Reads From Oilprice.com:

Join the discussion | Back to homepage

Leave a comment
  • Mamdouh Salameh on April 04 2020 said:
    The coming OPEC+ meeting on the 8th of April is doomed to fail for the following reasons.

    The first is that no matter how big oil production cuts are, they will have no positive impact on oil prices whatsoever while the coronavirus is raging.

    The second reason is that Saudi Arabia and Russia combined could neither muster 10 million barrels a day (mbd) cuts as President Trump was suggesting nor do they have the intention to do so for economic and political reasons. Russia may only agree to delay plans by Russian oil companies to raise production by 300,000-500,000 barrels a day (b/d). This won’t satisfy Saudi Arabia.

    The third reason is that President Trump wants to save the sinking shale oil industry at the expense of Russia, Saudi Arabia and other OPEC+ members without any contribution from shale oil production and therein lies the problem.

    The US shale oil industry has been since its inception in 2008 producing recklessly even at a loss just to enable the United States to have a say in the global oil market along with Russia and Saudi Arabia. In so doing it has been depriving most of the oil-producing nations of the world of their livelihood and also gaining market share at the expense of Russia and Saudi-led OPEC. It is only fair that the shale industry shares the pain with other oil-producing nations who are suffering badly from this state of events.

    In a nutshell, any oil cuts while the coronavirus outbreak is raging are oil down the drain.

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

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News