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IEA says oil demand won’t fully recover until at least 2022

  
Analysis, Crude
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IEA comments on the oil market in its latest report

Oil
  • Floating storage of crude oil in May fell by 6.4 mil barrels m/m to 165.8 mil barrels
  • Global oil supply fell by 11.8 mil bpd in May
  • Helped by OPEC+ countries reducing output by 9.4 mil bpd
  • Sees oil demand next year to rise by 5.7 mil bpd, but still lower than in 2019
  • Oil demand next year to remain 2.4 mil bpd below 2019 levels
On OPEC+, IEA says that they made a “strong start” and delivered 89% of its pledge to cut output but warns that rising prices could pose a problem:

“The market may present producers with an opportunity to ramp up more quickly than dictated by current OPEC+ policy, or US and other non-OPEC production could recover more strongly than forecast.”

With oil prices having moved up back close to $40, nobody – even US shale drillers – will want to miss out on the party.

IEA says there is no feasible agreement that could cut oil supply by enough to offset demand losses

  
Analysis, Crude
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Comments by IEA chief, Fatih Birol

  • April may be seen as the worst month ever
  • We may look back and say that April will be known as ‘Black April’ in the oil market
The risk mood continues to sour further after the IEA report, with oil prices threatening a firm break below the $20 level now.
Price is flirting with a drop below the 30 March low at 19.27 and as mentioned earlier, the drop in oil may be enough to set off a further wave of risk aversion in the market.

IEA sees fall in Q1 oil demand, the first quarterly drop in more than a decade

  
Analysis, Crude
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IEA estimates Q1 oil demand to fall by 435k bpd year-on-year

Oil
  • Q2 pglobal oil demand set to grow by 1.2 mil bpd
  • Assuming that economic activity returns progressively to normal
  • Cuts 2020 oil demand growth forecast by 365k bpd to 825k bpd
The changes to the forecasts and estimates are due to the coronavirus outbreak impact as IEA sees the widespread shutdown of the Chinese economy weighing heavily on demand – more so than OPEC – but they estimate a quicker recovery in the coming quarters.
That said, the agency says that the impact of the coronavirus outbreak will be felt by the oil market throughout the year and it is “hard to be precise about the impact” now.
Back to the headline reading, IEA had previously forecast a growth of 800k bpd in Q1 compared to a year earlier but now expect a contraction of 435k bpd instead – the first contraction since the global financial crisis back in 2009.
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