With COVID-19 cases surging in many parts of the world and more people working from home, the recovery in global oil demand is likely to be slow in the coming months, the International Energy Agency (IEA) said yesterday as it lowered its forecasts.
Oil demand quickly recovered part of the lost ground from April when much of the world was in lockdown to slow the spread of the virus that causes the COVID-19 illness, but the IEA said in its latest monthly report that it expects the recovery in demand “to decelerate markedly in the second half of 2020, with most of the easy gains already achieved.”
“The economic slowdown will take months to reverse completely, while certain sectors such as aviation are unlikely to return to their pre-pandemic levels of consumption even next year,” it said.
More waves of COVID-19 could propel nations to renew restrictions on movement, while the uptake of remote working is dampening demand for fuel, it said.
“Consumption remains about 10.7 million barrels per day [mbd] below 2019 levels due to the effect of virus containment measures on transport demand, the uptake of teleworking and the economic crisis unleashed by the virus,” the IEA said.
“With the on-coming northern hemisphere winter, we will enter uncharted territory regarding the virulence of COVID-19,” it said.
It cut its forecast for average oil demand this year, now expecting it to fall by 8.4mbd or 8.4 percent from last year, to 91.7mbd.
The OPEC oil cartel similarly trimmed its forecasts in its latest report on Monday. It now expects global demand to fall by 9.5mbd to 90.2mbd next year.
Both organizations pointed in particular to weakness in India, where oil demand dropped in July and last month, but the IEA said that oil demand in China has posted year-on-year increases, as the country’s economy returns to growth.
However, China has cut back on oil imports, which were helping support global markets, while OPEC nations and their allies have begun to increase production following temporary additional cuts.
“In last month’s report, we said that the market was in a state of ‘delicate rebalancing.’ One month later, the outlook appears even more fragile,” the IEA said.
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