Anjli Raval in London
IEA says spread of Covid-19 will have ‘significant’ impact on this year’s consumption
Oil demand this year will see the slowest rate of growth since 2011 as the coronavirus outbreak hits Chinese consumption and its impact spreads across the global economy, the International Energy Agency said.
In its monthly oil market report, the Paris-based body said that it had cut its 2020 growth forecast to 825,000 barrels a day from the 1.2m b/d it had initially expected. The IEA said it expects a quarterly contraction in oil demand, the first since the 2008- 2009 global financial crisis.
“The consequences of Covid-19 for global oil demand will be significant,” the IEA said on Thursday. Transport and services shutdowns in China and a halt to industrial activity is expected to hit exports and the broader economy.
The impact of the spread of the virus has already been sharp for oil prices, prompting global producers to discuss whether a deepening of production cuts is necessary to bolster the market.
Ahead of the outbreak, oil-rich countries were already concerned about a supply overhang in the first half of 2020 because of rising output in the US, Brazil, Canada and Norway that would outpace production from Opec nations.
The IEA said in the first quarter of 2020 the world would only require 27.2m b/d from Opec countries, which is far less than the group’s January production of 28.9m b/d.
Brent crude, the international oil benchmark, has fallen in recent weeks from $65 a barrel in January to just under $56 today.
Last year China accounted for more than three-quarters of global oil demand growth.
There is “little doubt”, the IEA said, that the impact of the virus on the economy and oil demand will be far greater than in the aftermath of the SARS outbreak.
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