Global oil demand to fall for first time since 2009 on coronavirus: IEA

Global oil demand is expected to decline in 2020, the first annual decline in more than a decade, as the impact of the coronavirus spreads around the world, constricting travel and broader economic activity, according to the International Energy Agency (IEA).

The latest oil market forecast, which does not take into account the latest crash after Saudi Arabia and Russia triggered a price war, further noted that the situation remains fluid, creating a degree of uncertainty over what the full global impact of the virus will be.

It also highlighted that demand dropped for the first time since 2009 because of the deep contraction in oil consumption in China, and major disruptions to global travel and trade.

“The coronavirus crisis is affecting a wide range of energy markets – including coal, gas and renewables – but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels,” Dr. Fatih Birol, IEA’s Executive Director, said.

He also emphasized on the implications that China, which accounts for more than 80% of the global oil demand growth in 2019, will have on energy markets worldwide.

“While the repercussions of the virus are spreading to other parts of the world, what happens in China still remains a concern,” he said.

The IEA estimates global oil demand at 99.9 million barrels per day (bpd) in 2020, down around 90,000 bpd from 2019. This is a sharp downgrade from the IEA’s forecast in February, which predicted global oil demand would grow by 825,000 bpd in 2020.

The short-term outlook for the oil market will ultimately depend on how quickly governments move to contain the coronavirus outbreak, how successful their efforts are, and what lingering impact the global health crisis has on economic activity, the report stressed.

“We are following the situation extremely closely and will provide regular updates to our forecasts as the picture becomes clearer,” Birol said.

IEA believes the impact of the coronavirus on oil markets may be temporary, but the long-term challenges facing the world’s suppliers are not going to go away, especially those dependent on oil and gas revenues.

Meanwhile, oil giant Saudi Aramco received on Wednesday a directive from the Ministry of Energy to increase its maximum sustainable capacity (MSC) to 13 million barrels per day (mbpd) from 12 mbpd.