The International Energy Agency on Thursday reported that oil demand is set to fall this quarter for the first time since the financial crisis in 2009 due to the coronavirus outbreak in China.
“Global oil demand has been hit hard by the novel coronavirus (COVID-19) and the widespread shutdown of China’s economy,” the International Energy Agency said in its latest monthly report.
“Demand is now expected to fall by 435,000 barrels year-on-year in the first quarter of 2020, the first quarterly contraction in more than 10 years” when it dropped during the global economic crisis, it added.
In the second quarter, it said it expected oil demand to grow 1.2 million barrels per day before normalising in the third quarter with growth of 1.5 million bpd on likely economic stimulus measures in China.
“China was responsible for around three-quarters of last year’s global oil demand growth. Before the outbreak of Covid-19, it was expected to drive over a third of oil consumption growth in 2020, but now we think it will be less than a fifth,” the IEA said.
It forecast a fall in demand for oil produced by OPEC while output growth by U.S. companies might not be impacted until later in the year.
OPEC output in January sank to its lowest level since the 2009 global recession, the IEA said, as a blockade reduced Libyan exports and the UAE reined in production.
“With Covid-19 potentially hitting demand hard in H1, producers are under pressure to make further cuts,” it said.
OPEC, Russia and other producers, a group is known as OPEC+, have agreed to cut output by 1.7 million bpd until the end of March to support the market.
OPEC+ is considering holding an extraordinary policy meeting to consider deeper cuts, sources said.
The IEA said Chinese refiners were set to slash runs by 1.1 million bpd in the first quarter, with throughput in 2020 contracting by 500,000 bpd year on year.
Global runs are set to expand by just 700,000 bpd in 2020, it said.