Oil agencies revised lower forecasts for global oil demand, with the outbreak of coronavirus being the key factor. The US Energy Information Administration (EIA) estimated that world oil demand will increase +1.02% to 101.74M bpd this year and then by +1.49% to 103.26M bpd in 2021. These figures were lower than January’s projections of 102.11M bpd and 103.49M bpd respectively. The outbreak of coronavirus is a key reason for the downgrade. As noted in the report, “the magnitude and duration of the coronavirus’s effects remain highly uncertain”. EIA has lowered estimates for Chinese and global oil consumption for this year as a result of the epidemic. On the supply side of the equation, EIA forecast that total non-OPEC supply might increase +3.73% to 67.89M bpd this year and then by +1.31% in 2021. The call for OPEC production is, however, reduced to 28.79M bpd this year, from 29.83M bpd in 2019. This is because US production is expected to soar, by +8.18%, to 21.15M bpd this year.
OPEC has also lowered its global oil demand estimate to 100.73M bpd for this year, compared with 100.98M bpd projected in January. Yet, this still marks a modest growth from 99.74M bpd in 2019. OPEC noted in its report that “the outbreak of the Coronavirus in China during 1H20 is the major factor behind this downward revision”. Last week, OPEC+ agreed to extend output cut until end-2020 in light of weaker consumption outlook. The Joint Technical Committee (JTC) explained in the accompanying statement that coronavirus epidemic “has had a negative impact on oil demand and oil markets”. It is “having a negative impact on economic activities, particularly on the transportation, tourism and industry sectors, particularly in China, and also increasingly in the Asian region and gradually in the world”.
In its latest report, the Paris-based International energy Agency (IEA) suggested that global oil demand has been “hit hard” by coronavirus and “the widespread shutdown of China’s economy”. The agency projected demand to decline, by -0.44M bpd y/y in 1Q20. This is the first decline in over a decade. For the year of 2020, IEA forecasts demand to grow by +0.37M bpd, down from +0.83M bpd projected last month. IEA added that the coronavirus outbreak has also led downward revision in global refinery runs.