Yemisi Izuora
The International Energy Agency (IEA), has said that gradual relaxation of Covid-related restrictions on movement is expected to help global oil demand recover faster in 2020 as compared to earlier assessments.
The IEA in its May oil market report, observed that oil demand in 2020 is expected to decline by 8.6 million barrels per day, as compared to an earlier assessment of 9.3 million barrels per day.
“In this report, we raised our 2020 oil demand change estimate by 690 kb/d from the previous edition to 91.2 mb/d. Oil consumption will fall this year by the largest amount in history, 8.6 mb/d, although the estimated decline is a bit less than last month’s estimate of 9.3 mb/d,” IEA said.
The Organization of Petroleum Exporting Countries (OPEC) on the other hand has projected oil demand to contract further in 2020, as compared to its earlier assessments.
OPEC as part of its May oil market report released yesterday projected global oil demand to contract by 9.07 million barrels per day in 2020, as compared to an earlier assessment of 6.85 million barrels per day.
According to IEA estimates, oil demand in April declined by around 25.2 million barrels per day year-on-year, as more than four billion people were subjected to some form of confinement due to the ongoing COVID-19′ pandemic.
The agency expects the fall to narrow to around 21.5 million barrels per day in May and to 13 million barrels per day in June, as various governments progressively reopen their economies.
“We have raised our estimates for 2Q20 by circa 3.2 mb/d on evidence of stronger than expected mobility in some European countries and the US. We have also increased our Chinese demand figures for March and April. Together, these moves suggest that the decline in oil demand during 1H20 may not be as steep as first feared,” IEA said.
IEA expects oil demand to contract further in the second half of 2020 by 4.6 million barrels per day year-on-year, as compared to an earlier assessment of 4.3 million barrels per day, primarily due to lower than expected economic recovery in China.
On the supply side, IEA projects global oil supply to fall by a massive 12 million barrels per day in May to a nine-year low of 88 million barrels per day.
“For some OPEC countries, e.g. Saudi Arabia, Kuwait and the UAE, lower May production is from record highs in April. Led by the United States and Canada, April supplies from countries outside of the deal were already 3 mb/d lower than at the start of the year,” IEA said.
Saudi Arabia had earlier announced to cut its crude supply by 3.4 million barrels per day in May and has announced an extra voluntary reduction of one million barrels per day for June.