Global oil demand is expected to drop this quarter for the first time in over a decade as the coronavirus batters China’s economy, the International Energy Agency, IEA, said.
It explained that given the abundance of supply, disruptions in the Organisation of Petroleum Exporting Countries, OPEC, members such as Libya and Nigeria are having little impact on prices. According to the IEA, the new estimates show that oil markets face a significant surplus despite the latest production cuts by OPEC and its partners. Crude already sank to a one-year low below $50 a barrel last week and the impact of the epidemic will be felt throughout the year. “Demand has been hit hard by the novel coronavirus and the widespread shutdown of China’s economy,” the Paris-based IEA said.
“The crisis is ongoing and at this stage it is hard to be precise about the impact.”
World fuel consumption which had previously been expected to grow by 800,000 barrels a day during the three-month period, compared with a year earlier will instead contract by 435,000 a day, the IEA said in its monthly oil market report.
For 2020 as a whole, the virus will curb annual growth in global consumption by about 30 percent to 825,000 barrels a day, the lowest since 2011. The effects will be more significant than those of the 2003 SARS epidemic because of China’s increased importance and integration within the world economy.
The outbreak has shuttered businesses and prompted the quarantine of tens of millions of people in China, the world’s biggest crude importer.
The country accounted for about 75 per cent of last year’s oil-demand growth, according to the IEA, which advises most major economies.
Recently, the U.S. Energy Information Administration also cut its demand outlook due to the virus. The EIA lowered its first quarter global petroleum and liquids consumption forecast by 880,000 barrels a day.