The International Energy Agency (IEA) cut its forecast on global oil demand in 2020 to 91.9 million barrels per day as the coronavirus (Covid-19) outbreak continued to paralyze mobility.
On Tuesday, September 15, 2020, IEA wrote in the report, stating that global oil demand is expected to be 91.9 mb/d in 2020, down 8.1 mb/d when compared to 2019, reflecting the stalling of mobility as the number of Covid-19 cases remains high, and weakness in the aviation sector.
Meanwhile, global oil supply rose by 2.5 mb/d to 90 mb/d in July after Saudi Arabia ended its voluntary 1 mb/d cut, the UAE exceeded its OPEC+ target and US production started to recover. Global supply looks set to fall by 7.1 mb/d in 2020 and rise by 1.6 mb/d next year.
IEA stated that global refinery intake is recovering, but the pace will lag behind the demand rebound as product inventory levels are very high. In July, crude runs are estimated at 3.7 mb/d above the low point in May, with another 5.6 mb/d ramp-up expected by end-2020. In 2020, runs will decline by 6.9 mb/d but in 2021 they will rebound by only 4.5 mb/d. Runs in 2021 will be 2.7 mbd below the historical peak seen in 2018.
In May, crude output fell by nearly 2 mb/d from April’s level and, at 10 mb/d, it was 2.9 mb/d below the all-time high seen in November. However, WTI prices have averaged around $40/bbl since mid-June with little volatility, and US production is starting to rise again.
IEA’s balances showed that in June demand exceeded supply, and for the rest of the year there is an implied stock draw. However, ongoing uncertainty around demand caused by Covid-19 and the possibility of higher output means that the oil market’s re-balancing remains delicate.