The Paris based International Energy Agency (IEA), in its monthly report, has increased its oil demand forecast for 2020. But they cautioned that the continuing spread of COVID-19 poses a threat to this positive outlook.
IEA bumped up its forecast 400,000 barrels per day from its last month outlook. According to the latest report, the forecast for 2020 is now 92.1 million barrels per day (BPD) and cited the reason for this as a “lesser than expected decline” in the second quarter.
“While the oil market has undoubtedly made progress, the large, and in some countries, an accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside,” the IEA said in its monthly report.
IEA is of the opinion that the easing of restrictions in the last few weeks has definitely been beneficial in triggering a fast rebound to fuel deliveries in the months of May, June and possibly also in July.
But the report has a grim outlook for oil refining activities as they expect a more than anticipated decline with a forecast of even lesser growth in 2021.
Demand in 2021 is likely to be 2.6 million BPD below 2019 levels, with kerosene and jet fuel accounting for three-quarters of the shortfall due to a drop in air travel.
“For refiners, any benefit from improving demand is likely to be offset by expectations of much tighter feedstock markets ahead. Refining margins will also be challenged by a major product stock overhang from the very weak second quarter of 2020,” the IEA said.
On the supply front, the IEA said that to rein in demand, the Petroleum Exporting Countries
Organization, a coalition known as OPEC+ and other producers like Russia, had demonstrated 108% compliance with their agreement.
Other producers, especially the United States, had also been affected by market-driven cuts, although US production was expected to gradually recover in the second half of 2020, while the lifting of force majeure on Libyan crude exports may add another 900,000 BPD to global markets by the end of this year.
