The International Energy Agency (IEA) said that the relaxation of lockdown restrictions in some countries is expected to support oil demand, but it will not be enough to prevent the consumption from falling by a record amount in 2020. IEA now expects global crude demand to fall by 8.6 million bpd, trimmed by 690,000 bpd from the agency’s previous forecast last month.
IEA expected around 2.8 billion people would be under coronavirus containment measures by the end of May, compared to 4 billion in April. Stronger-than-expected mobility in some American states and European countries are expected to lend support to demand. Demand from China is also projected to grow.
Despite the recovery, IEA warned of persisting major uncertainties, including whether the restriction easing will trigger a new wave of COVID-19 infections. A more prolonged lockdown will hurt demand even more.
Producers outside OPEC+ are expected to cut output by 3 million bpd in April, led by the US and Canada. The US will be the largest single contributors to the supply decline with output declining by 2.8 million bpd at the end of 2020, IEA said.
Saudi Arabia, the UAE, and Kuwait managed to lower output to below their respective commitment in April. However, IEA director Fatih Birol was not sure whether the cuts by the Gulf countries would be enough to support the balance in the global oil market.
IEA also said that global crude oil stocks would increase by 9.7 million bpd in the first half. However, 5.5 million bpd of them would be drawn down in the second half of 2020 if producers honoured their supply cut pledges and the virus did not re-surge.
