The IEA Has Improved Its Forecast For A Drop In Oil Demand In 2020 To 7.9 Million Barrels Per Day
The drop in oil demand in 2020 due to the situation with the pandemic and the spread of the coronavirus may amount to 7.9 million barrels per day (b/d) in annual terms, according to the International Energy Agency (IEA) in a July report. The forecast is improved compared to the June estimate by 200 thousand b/d.
Current data shows that the worst period for the oil market remained in the first half of the year when oil consumption fell by almost 11 million b/d due to quarantine measures around the world. In the second half of the year, the fall, as expected in the IEA, will be only 5.1 million b/s. "According to our estimate, the global demand for oil this year will be 92.1 million b/d, which is 7.9 million b/d below the level of 2019; this is slightly less than we expected in the last report," the Agency's experts write.
In 2021, demand may grow to 97.4 million b/d, which is about 2.6 million b/d below the level of 2019.
The Outlook for oil supply
A reduction in oil production worldwide due to the pandemic will lead to a drop in global supply by 7.1 million b/d, the IEA writes in a report. The assessment takes into account the impact of the OPEC + deal.
In June, the world's oil supply fell by 2.4 million b/d to 86.9 million b/d, which is the lowest in nine years. However, in April, the drop was more significant - 14 million b/s.
"If OPEC+ remains within the agreed cuts, global supply will fall by 7.1 million b/d in 2020, before we can see a modest recovery of 1.7 million b/d in 2021," the IEA experts note.
Implementation of the OPEC+ deal
OPEC + production in June fell by almost 2 million b / d compared to the previous month and reached 33.4 million b / d. The agreement to reduce oil production this month was fulfilled by 108% against 89% a month earlier, according to the IEA report.
"The level of implementation of the OPEC + agreement in June was 108%; this includes the effect of an additional 1 million b/d reduction in production in Saudi Arabia," the report says.
Its data shows that Russia met its quota for reducing oil production by 100% in June. Kazakhstan has improved its indicators-98% of the plan, Angola-89%, Iraq-89%. Low indicators are still in the Congo-34%, and Gabon has increased oil production in July instead of reducing.
In total, OPEC countries in June reduced oil production by 112% of the plan, and non - OPEC countries-by 99%.
According to the IEA, Rosneft reduced production in June by 600 thousand b / d, or 15% compared to April, LUKOIL reduced by 350 thousand b/d (-20%), Surgutneftegaz - by 310 thousand b/d (-24%), the report says.
Commercial oil reserves of the Organization for Economic Cooperation and Development Countries (OECD) in may 2020 increased by almost 82 million barrels and exceeded 3.2 billion barrels, according to the July report of the IEA. That is, since the end of 2019, they have grown at a rate of 2 million barrels per day.
At the end of May, the oil reserves of the OECD countries exceeded the level recorded at the end of 2019 by more than 300 million barrels.
According to preliminary data for June, US stocks increased by almost 25 million barrels due to petroleum products. At the same time, stocks in floating storage decreased by 35 million barrels, while in May, their volume reached a historical high of 176 million barrels.
Production in the USA
The drop in oil production in the US, caused by the collapse in the oil market, apparently reached the bottom. Production growth may begin in the second half of the year, according to the July report.
According to the IEA, US oil production in April fell by 1 million barrels per day (b/d) compared to March and continued to decline in May and June by 1.3 million and 0.5 million b/d, respectively. "However, in the second half of the year, production may begin to grow, and we see that the decline has come close to its bottom," the Agency's experts believe.
In addition, OPEC+ has been easing restrictions on oil production since August. In addition, production in Libya, which is not subject to OPEC + obligations, may increase by 0.9 million b/d to the current level by the end of the year.
"While the oil market has undoubtedly made progress since black April, the large and, in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to market prospects almost certainly remains," the IEA concludes.
Earlier, the US Department of energy raised its forecast for daily oil production in the US in 2020 and 2021 to 11.63 million barrels (+0.6%) and 11.01 million barrels (+1.57%), respectively.
About the OPEC+ deal
The OPEC+ agreement came into force on May 1. It assumes a reduction in oil production by the Alliance countries by 9.7 million barrels per day during May - July. The agreements will be valid for two years, but from August to December 2020, 7.7 million barrels per day will already be reduced under the Alliance, and from January 2021 to the end of April 2022 - 5.8 million barrels per day. The transaction parameters may be revised in December 2021.