The International Energy Agency announced that the global demand for oil will return to normal in the third quarter to grow 105 million barrels per day on an annual basis due to the expected stimulus measures in China.
Demand is at its lowest level since 2011
The agency pointed to reducing the forecasts for oil demand growth 365 thousand barrels per day due to the outbreak of the Chinese virus, at the lowest level since 2011.
Jeremy Wire, chief executive of Trafigura Global Commodity Trading Group, said the company expects the outbreak of China’s virus to reduce global oil demand growth by 300,000 bpd in 2020 to about one million bpd.
Wire told Fox News that it expected a significant acceleration in demand during the second half of the year.
He also expected economic stimulus in China during the second half, which will support industrial demand there.
Demand fell in the current quarter
The International Energy Agency said on Thursday that oil demand will decline in the current quarter for the first time since the financial crisis in 2009, due to the outbreak of the coronavirus in China.
“The consequences of Coffed-19 for global oil demand will be significant,” the Paris-based agency said in a monthly report. Covid-19 is the new scientific name for the virus.
She added that demand is expected to shrink in the first quarter of 2020 by 435 thousand barrels per day compared to a year ago, noting that it will be “the first quarterly decrease in more than a decade.”
“For the entire year 2020, we reduced our forecast for global growth 365,000 bpd to 825,000 bpd, the lowest since 2011,” the Energy Agency said, adding that it assumes economic activity is gradually returning to normal from the second quarter.
The agency said it expects demand for oil in the second quarter to grow by 1.2 million barrels per day, then return to normal in the third quarter with growth of 1.5 million barrels per day in light of expected stimulus measures from China.
“China was responsible for about three-quarters of the growth in global oil demand last year,” the agency added. Before the Covid-19 outbreak, it was expected to drive more than a third of global oil consumption growth in 2020, but now we think it will be less than a fifth. ”
And it expected a decline in demand for oil produced by OPEC, while the growth of US companies production may not be affected until later in the year.
The IEA said OPEC production fell in January to its lowest level since the global recession in 2009, as closures cut Libya’s exports while the UAE curbed its production.
“Covid-19 could hit demand hard in the first half, and producers are under pressure to make further cuts,” she said.
OPEC + agreed to cut production
OPEC, Russia and other producers, within the framework of the OPEC + alliance, had agreed to cut production by 1.7 million barrels per day until the end of March to support the market.
OPEC + is considering holding an extraordinary meeting to consider deepening the cuts, sources said.
The International Energy Agency said that Chinese oil refineries will reduce operating rates by 1.1 million barrels per day in the first quarter and productivity will decrease in 2020 by 500 thousand barrels per day on an annual basis.
It added that global employment rates will increase by no more than 700,000 bpd in 2020.