The International Energy Agency (IEA) has said that there will be a greater fall in demand than was previously expected by it for the current year as well as for 2021 because of a surge in new infections of the novel coronavirus in different parts of the world.
While issuing a warning that the increase in the number of Covid-19 cases would translate into a slower recovery for the global aviation industry and low demand for transport fuels, the global oil watchdog also reduced almost a one fourth of a million barrels of oil a day (bpd) from its previous forecasts made by it for next year.
The IEA cut its global oil demand forecasts by 140,000 barrels of oil to 91.9m bpd for 2020 in its latest monthly report, which was a first since the start of the pandemic. The demand forecast by the body was lower by more than 8m bpd than the oil demand globally reported last year.
Its forecast for demand of oil in 2021 was also downgraded by the IEA as it slashed about 240,000 bpd from its previous forecasts and pegged the 2021 demand at an average of 97.1m bpd with the slow recovery to normal for the global aviation industry.
Caution was also sounded for a recovery in oil demand over the second half of the year by the Paris-based agency as it decided to slash its demand forecast because of a rise in fresh cases of the virus infection.
IEA said that the gloomy outlook for the global aviation industry was the primary reason behind it also slashing the oil demand forecasts for 2021.
However, there was little effect on oil prices on Thursday morning of the IEA’s report wihc is considered an influential barometer for the global oil market.
“The oil market enjoys some calm summer weeks, seemingly taking a break from the turbulent times earlier this year,” said Norbert Rücker, an analyst the Swiss bank Julius Baer.
Implementing a strategy of continuing with the deep cuts in oil production to avoid overwhelming the market with unwanted crude conducted by the world’s largest oil producers, including the Opec cartel and its allies, was instrumental in propping up global oil prices through the summer.
But after Saudi Arabia ended its voluntary production cut of 1m barrels and with the oil production by the United Arab Emirates surpassing the production target set for it by the historic Opec+ agreement, oil supplies rose by 2.5m bpd last month, to 90m, the IEA said.
There has also been a recovery in US oil production, the IEA added.
(Adapted from TheGuardian.com)