Released February 24, 2020 | GALWAY, IRELAND
en
Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--Global oil demand has been hit hard by the coronavirus (Covid-19) according to the latest figures from the International Energy Agency (IEA) and the U.S. Energy Information Administration (EIA).
Demand is now expected to contract by 435,000 barrels per day (BBL/d) in the first quarter of 2020, the first quarterly decrease in more than a decade, IEA stated. For 2020 as a whole, IEA has reduced its global growth forecast by 365,000 BBL/d to 825,000 BBL/d, the lowest since 2011. Meantime, growth in 2019 has been trimmed by 80,000 BBL/d to 885,000 BBL/d on lower-than-expected consumption in the OECD.
The EIA's latest Short-Term Energy Outlook (STEO), highlighted how global petroleum and liquid fuels demand will average 100.3 million BBL/d in the first quarter of 2020. This is 900,000 BBL/d less than forecast in the January STEO and reflects both the "effects of the coronavirus and warmer-than-normal January temperatures across much of the northern hemisphere."
"The crisis is ongoing and at this stage it is hard to be precise about the impact," IEA stated. "Our initial view is based on an assumption that economic activity returns progressively to normal in the second quarter of 2020. The impact of Covid-19 for oil prices have been sharp: Brent values fell by about $10 per barrel, or 20%, to below $55 per barrel. Before Covid-19 came along, the market was already nervous in anticipation of a supply overhang of 1 million BBL/d in the first half of 2020 due to continued expansion in the U.S., Brazil, Canada, and Norway. Even threats to security of supply, e.g. tension in Iraq, a 1 million BBL/d fall in Libyan oil production, and force majeure declared for some Nigerian cargoes, had little impact on prices. Now that the demand outlook has weakened, prices have moved significantly down.
IEA found that from the perspective of producers, before the Covid-19 crisis, the market was expected to move toward balance in the second half of 2020 due to a combination of the production cuts implemented at the start of the year, stronger demand and a tailing off of non-OPEC (Organization of the Petroleum Exporting Countries) supply growth. "Now, the risk posed by the Covid-19 crisis has prompted the OPEC+ countries to consider an additional cut to oil production of 600,000 BBL/d as an emergency measure on top of the 1.7 million BBL/d already pledged," the IEA stated. "Lower oil prices, if sustained, are also bad news for highly responsive U.S. oil companies, but we are unlikely to see an impact on output growth until later in the year. The effect of the Covid-19 crisis on the wider economy means that it will be difficult for consumers to feel the benefit of lower oil prices." The IEA said that it expects a negative impact on the refining sector. The advent of coronavirus has meant that the IEA is revising down the outlook for global refinery runs. Chinese crude throughputs for the first quarter of 2020 have been cut by 1.1 million BBL/d and are now expected to contract by 500,000 BBL/d year-on-year. As a result, global runs are forecast to expand by just 700,000 BBL/d in 2020. The launch of IMO's new bunker fuel regulations in January boosted simple refining margins based on sweet crudes.
According to EIA, "the magnitude and duration of the coronavirus's effects remain highly uncertain, but EIA is reducing its estimates for Chinese and global oil consumption for 2020 as a result of the events." It expects liquid fuels consumption in China to average 14.8 million BBL/d from February through April, when EIA assumes the effects of travel restrictions will be most acute. That level of consumption is 400,000 BBL/d less than forecast in last month's STEO. Jet fuel demand is likely to fall because of travel restrictions and demand for other oil products is likely to fall because of lower economic growth.
EIA has also lowered its expected liquid fuels consumption for the rest of Asia (excluding China) by 100,000 BBL/d for the February through April period compared with last month's STEO. In addition to demand disruptions, oil markets faced renewed supply disruptions from Libya, "where unrest in the country led to force majeure events at its main export terminals."
Looking ahead, the EIA recognised "significant uncertainty in forecasting global oil inventory and crude oil price changes amid both ongoing disruptions in crude oil supply and reductions in oil demand". It estimated global inventories increased by 2.5 million BBL/d in January and will rise by an average of 600,000 BBL/d during the first half of 2020, 100,000 BBL/d more than expected in last month's STEO. Consumption will rise by 1.0 million b/d in 2020, compared with forecast growth of 1.3 million BBL/d in the January STEO. EIA assumed that OPEC will reduce crude oil production by 500,000 BBL/d from March through May in response to concerns over oil demand growth. The Brent crude oil price will average $58 per barrel in the first half of this year before rising to average $64 per barrel during the final six months of the year.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
Demand is now expected to contract by 435,000 barrels per day (BBL/d) in the first quarter of 2020, the first quarterly decrease in more than a decade, IEA stated. For 2020 as a whole, IEA has reduced its global growth forecast by 365,000 BBL/d to 825,000 BBL/d, the lowest since 2011. Meantime, growth in 2019 has been trimmed by 80,000 BBL/d to 885,000 BBL/d on lower-than-expected consumption in the OECD.
The EIA's latest Short-Term Energy Outlook (STEO), highlighted how global petroleum and liquid fuels demand will average 100.3 million BBL/d in the first quarter of 2020. This is 900,000 BBL/d less than forecast in the January STEO and reflects both the "effects of the coronavirus and warmer-than-normal January temperatures across much of the northern hemisphere."
"The crisis is ongoing and at this stage it is hard to be precise about the impact," IEA stated. "Our initial view is based on an assumption that economic activity returns progressively to normal in the second quarter of 2020. The impact of Covid-19 for oil prices have been sharp: Brent values fell by about $10 per barrel, or 20%, to below $55 per barrel. Before Covid-19 came along, the market was already nervous in anticipation of a supply overhang of 1 million BBL/d in the first half of 2020 due to continued expansion in the U.S., Brazil, Canada, and Norway. Even threats to security of supply, e.g. tension in Iraq, a 1 million BBL/d fall in Libyan oil production, and force majeure declared for some Nigerian cargoes, had little impact on prices. Now that the demand outlook has weakened, prices have moved significantly down.
IEA found that from the perspective of producers, before the Covid-19 crisis, the market was expected to move toward balance in the second half of 2020 due to a combination of the production cuts implemented at the start of the year, stronger demand and a tailing off of non-OPEC (Organization of the Petroleum Exporting Countries) supply growth. "Now, the risk posed by the Covid-19 crisis has prompted the OPEC+ countries to consider an additional cut to oil production of 600,000 BBL/d as an emergency measure on top of the 1.7 million BBL/d already pledged," the IEA stated. "Lower oil prices, if sustained, are also bad news for highly responsive U.S. oil companies, but we are unlikely to see an impact on output growth until later in the year. The effect of the Covid-19 crisis on the wider economy means that it will be difficult for consumers to feel the benefit of lower oil prices." The IEA said that it expects a negative impact on the refining sector. The advent of coronavirus has meant that the IEA is revising down the outlook for global refinery runs. Chinese crude throughputs for the first quarter of 2020 have been cut by 1.1 million BBL/d and are now expected to contract by 500,000 BBL/d year-on-year. As a result, global runs are forecast to expand by just 700,000 BBL/d in 2020. The launch of IMO's new bunker fuel regulations in January boosted simple refining margins based on sweet crudes.
According to EIA, "the magnitude and duration of the coronavirus's effects remain highly uncertain, but EIA is reducing its estimates for Chinese and global oil consumption for 2020 as a result of the events." It expects liquid fuels consumption in China to average 14.8 million BBL/d from February through April, when EIA assumes the effects of travel restrictions will be most acute. That level of consumption is 400,000 BBL/d less than forecast in last month's STEO. Jet fuel demand is likely to fall because of travel restrictions and demand for other oil products is likely to fall because of lower economic growth.
EIA has also lowered its expected liquid fuels consumption for the rest of Asia (excluding China) by 100,000 BBL/d for the February through April period compared with last month's STEO. In addition to demand disruptions, oil markets faced renewed supply disruptions from Libya, "where unrest in the country led to force majeure events at its main export terminals."
Looking ahead, the EIA recognised "significant uncertainty in forecasting global oil inventory and crude oil price changes amid both ongoing disruptions in crude oil supply and reductions in oil demand". It estimated global inventories increased by 2.5 million BBL/d in January and will rise by an average of 600,000 BBL/d during the first half of 2020, 100,000 BBL/d more than expected in last month's STEO. Consumption will rise by 1.0 million b/d in 2020, compared with forecast growth of 1.3 million BBL/d in the January STEO. EIA assumed that OPEC will reduce crude oil production by 500,000 BBL/d from March through May in response to concerns over oil demand growth. The Brent crude oil price will average $58 per barrel in the first half of this year before rising to average $64 per barrel during the final six months of the year.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Our European headquarters are located in Galway, Ireland. Follow IIR Europe on: Facebook - Twitter - LinkedIn For more information on our European coverage send inquiries to info@industrialinfo.eu or visit us online at Industrial Info Europe.
