According to the International Energy Agency’s most recent oil market forecast, the overall global oil demand is likely to decline as the year 2020 continues on thanks in large part to the coronavirus and its current impact around the world, as well as the virus’s ability to constrict travel and broader economic activity.
The situation itself currently remains fluid and is creating a large degree of exactly what the full global impact of the coronavirus itself will actually be. According to the International Energy Agency, the demand for oil this year will end up decreasing for the first time since the year 2009 thanks to the deep contraction in oil consumption in China, as well as major disruptions to both global trade and travel brought on by the onset of the coronavirus.
The Executive Director of the International Energy Agency had the following to say in regards to the matter:
“The coronavirus crises is affecting a wide range of energy markets – including coal, gas, and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels. This is especially true in China, the largest energy consumer in the world, which accounted for more than 80% of global oil demand growth last year. While the repercussions of the virus are spreading to other parts of the world, what happens in China will have major implications for global energy and oil markets.”
The International Energy Agency now views global oil demand as being at 99.9 million barrels a day in 2020. This is a decrease of 90,000 barrels a day from 2019 and is also a sharp downgrade from the company’s forecast back in February. This is when they predicted that global oil demand would actually increase by 825,000 barrels a day in 2020.
In terms of the short-term outlook for the oil market itself, this will ultimately depend on how quickly governments around the world will be able to contain the coronavirus outbreak, as well as how successful their efforts are and the overall impact that the global health crisis has on economic activity itself.
The International Energy Agency has also developed two other scenarios for how global oil demand could actually evolve this year in order to account for the uncertainty that faces the world’s energy markets. In a lower case, which is viewed as being more pessimistic, global measures would fail to contain the coronavirus, which would then cause overall global demand to decrease by 730,000 barrels a day in 2020. On the other hand, a higher case, which is viewed as being more optimistic, would see the virus being contained quickly worldwide, thereby allowing global demand to increase by 480,000 barrels a day in 2020.
The International Energy Agency’s Executive Director further stated the following regarding these scenarios:
“We are following the situation extremely closely and will provide regular updates to our forecasts as the picture becomes clearer. The impact of the coronavirus on oil markets may be temporary. But the longer-term challenges facing the world’s suppliers are not going to go away, especially those heavily dependent on oil and gas revenues. As the IEA has repeatedly said, these producer countries need more dynamic and diversified economies in order to navigate the multiple uncertainties that we see today.”