The International Energy Agency (IEA) has drastically reduced its demand growth prediction for this year, meaning that it now expects total annual demand to drop for the first time since 2009 following the global economic crises.
The IEA revealed the downgrade in its March Monthly Oil Market report. It cut 1.1 million barrels per day (bpd) off its previous growth estimates, leaving a year-on-year drop in demand of 90,000 bpd. The development follows an earlier growth downgrade in the IEA’s February report. Fatih Birol, the IEA’s executive director, also recently cautioned that the global demand for oil may be more affected by the coronavirus spread than initially expected.
The IEA comments in the report:
“While the situation remains fluid, we expect global oil demand to fall in 2020—the first full-year decline in more than a decade—because of the deep contraction in China, which accounted for more than 80% of global oil demand growth in 2019, and major disruptions to travel and trade.”
Oil prices have dropped drastically in the wake of the coronavirus outbreak and the OPEC+ group’s failure to agree on further production cuts. While this is clearly not good for oil companies, especially the smaller shale operators that may struggle to stay in business, downstream producers like Tygris and Valvoline may benefit from lower materials costs when making products like transmission and agricultural oil. Consumers should also benefit from lower fuel prices, leaving them with more cash for discretionary spending.
