IEA sees first global oil demand drop in a decade

Daniel Fowler
February 15, 2020

With China being an enormous client of oil and the supply of numerous progress in oil demand in recent times, the disaster can have a significant effect on oil producers.

Instead, it said the Covid-19 outbreak will affect 435,000 barrels per day (Bpd) of crude demand in the first quarter, compared to the same period a year ago.

The EIA - representative of the country that is now both the world's biggest oil consumer and also its largest producer - finds itself in the middle. The IEA also slashed its 2020 growth outlook by 365,000 barrels a day from its January forecast to 825,000 barrels a day, the lowest since 2011.

"Front month prices are down around 20% since the start of the outbreak, with Brazilian, West African and Russian crudes - all popular with independent (Chinese) refiners in Shandong - under pressure", said Roger Diwan, vice president of financial services at IHS Markit, in a note.

For the week, WTI crude oil futures gained about 3.3%, recording their first weekly gain since early January.

Oil prices were trading Friday without much change as the coronavirus epidemic that emerged in China continues to keep global oil demand low.

The IEA doesn't forecast modifications in oil costs; however, stated customers have been unlikely to get a lot of a lift from cheaper petrol and diesel on the finish of the day.

190627 oil prices
Aden- Yasmin Abdel Azim- Image Credit Supplied

Following the pattern set for all previous quarters of 2019, estimates of oil demand and year-on-year growth in the final quarter are now being cut as hard data become available.

Chinese demand is critical to global oil markets. In another sign of weakening consumption, the US reported the biggest weekly jump in crude stockpiles in three months.

It noted that this is 1.7 mbd below what what OPEC produced in January when the new production cuts came into force.

"The outbreak of the coronavirus in China during the first half of 2020 is the major factor behind this downward revision", Opec said.

The downgrade came after a technical committee of the OPEC members and their allies - a group known as OPEC Plus - recommended a production cut of 600,000 barrels per day at the end of their February 4-6 meeting.

Opec's more positive view on oil demand leaves it as the only one of the big three worldwide agencies expecting global stockpiles to be whittled down this year, assuming Opec output remains unchanged from its January level of 28.86 million barrels a day reported by the group's secondary sources.

Contango spread in Brent is unchanged at 15 cents per barrel from a week earlier, while the WTI contango is at 24 cents a barrel, from 17 cents last week.

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