VIENNA – There will be practically no increase in the worldwide consumption of crude oil in 2020 due to the impact of the coronavirus on the global economy, the Organization of Petroleum Exporting Countries (OPEC) announced on Wednesday in a report in which it reduced the growth in world demand for oil from 990,000 barrels per day to 60,000 bpd, a 93 percent drop.
In its monthly report published on Wednesday, OPEC calculates that the volume of crude that the world will need from the 13 cartel partners will be reduced this year by 5.8 percent – or 1.73 million bpd – compared with 2019 to 28.18 million bpd.
“Following a considerably weaker economic growth for 2H19 in Japan, Euro-zone and in India, the COVID-19 related developments necessitated a further downward revision of the 2020 GDP growth forecast to 2.4% from 3.0% forecast in the previous month. This compares to a 2019 GDP growth estimate of 2.9%. … Further downside risks to the world economy remains given the uncertainty regarding the magnitude of COVID-19 related impacts,” said OPEC in the document.
The estimates are based on the “adverse effects” that the epidemic have already had on transportation and on the industrial use of fuel in China, as well as on petroleum consumption in other regions hit by the coronavirus, including Japan, South Korea, Europe and the Middle East.
At this point, OPEC calculates that this year the total demand for crude will not exceed, in contrast to its earlier estimates, the psychological barrier of 100 million bpd, but rather will remain at an average of 99.73 million bpd provided that the world recovers relatively quickly from the crisis surrounding the spread of the virus.
It is in keeping with this cautiously optimistic view that experts in OPEC are hoping for a solid recovery in the second half of the year after feeling the major impact in the current quarter, with a falloff in demand of almost 2 million bpd compared with the demand level during the same period in 2019.
Nevertheless, the OPEC experts said, “Considering the latest developments, downward risks currently outweigh any positive indicators and suggest further likely downward revisions in oil demand growth should the current status persist.”
Thus, they feel that it is “probable” that they will have to reduce their estimates even further if the current situation persists, and then they could actually forecast a drop in annual global demand for crude, the first since 2009 and a scenario predicted by the International Energy Agency on Monday.