IEA sees largest drop of oil demand in history in 2020

The International Energy Agency (IEA) said in its monthly oil market report that it expects the fall in oil demand this year to be the largest in history. Demand was expected to fall by 8.1 million barrels per day in 2020, before growing by 5.7 million barrels per day in 2021.

The IEA said oil demand in the second quarter, which saw the greatest impact from lockdown measures, was 17.8 million barrels per day lower when compared to the same period last year.  New data showed that demand destruction in the early part of the year was slightly less than expected, although still unprecedented.

The IEA’s forecast for oil demand in 2020 is 91.7 million barrels per day, nearly 500,000 barrels higher per day than it expected in May, due to stronger-than-anticipated deliveries during the coronavirus lockdown. In China, oil demand recovered fast in March-April and India’s demand rose sharply in May.

"Even so, demand in 2020 is expected to be 8.1 million bpd lower than in 2019, with the biggest declines seen in the first half of the year. Our first forecast for 2021 as a whole shows demand growing by 5.7 million bpd, which, at 97.4 million bpd, will be 2.4 million bpd below the 2019 level. This gap between 2021 and 2019 is largely explained by the dire situation of the aviation sector," the reported highlighted.

The IEA said in its report that while the oil market remains fragile, the recent modest recovery in prices suggests that the first half of 2020 is ending on a more optimistic note.

On the supply side, the IEA stated: "Record output cuts from OPEC+ and steep declines from other non-OPEC producers saw global oil production fall by a massive 12 million bpd in May. After tumbling by 7.2 million bpd in 2020, global oil output is set for a modest 1.7 million bpd recovery in 2021, assuming OPEC+ cuts ease.”

In conclusion, the IEA said: "In sporting terms, the 2020 oil market is now close to the half time mark. So far, initiatives in the form of the OPEC+ agreement and the meeting of G20 energy ministers have made a major contribution to restoring stability to the market. If recent trends in production are maintained and demand does recover, the market will be on a more stable footing by the end of the second half."