[Newsphopick=Kingsley Lim] According to the International Energy Agency (IEA), the global coronavirus pandemic caused worldwide demand for oil to fall in the first half of 2020, as many countries around the world went into lockdown to curb the spread of infections. Sectors which have been hit hard include aviation, transport and tourism.
In the latest monthly report issued by IEA, it said "The COVID-19 pandemic has cast a long shadow over oil demand, which we now expect to fall by 8.1 million barrels per day year-on-year in 2020."
On the whole, IEA’s energy demand forecast reflects the general weakness of the global economy. It expects worldwide oil demand for 2020 to be 91.9 million barrels per day, the first downgrade in recent months. This is a fall of 8.1 million barrels of oil per day from the year-ago period. Compared to the previous projection, the new forecast is 140,000 barrels per day lower.
However, there is a silver lining according to the agency. The report suggested that demand in 2021 is expected to recover to 97.1 million barrels per day, though this is less than what was previously forecasted. Within the report, it identified demand for jet fuel as a source of weakness going forward.
"We have revised down our 2021 demand estimate... as the aviation sector will likely take longer to recover. By December 2021, global oil consumption will still be two percent lower than at the end of 2019," said the report.
The IEA reports comes as the largest oil and gas companies in the world reported a couple of quarters of consecutive losses as the coronavirus lockdown and social restrictions led to a shock in the energy markets.
According to IEA Executive Director Fatih Birol, 2020 may well become the worst year in the history of oil markets.
“Recent mobility data suggests the recovery has plateaued in many regions, although Europe, for now, remains on an upward trend,” said the IEA in a press release on Thursday.
“For road transport fuels, demand in the first half of 2020 was slightly stronger than anticipated, but for the second half, we remain cautious and the upsurge in Covid-19 cases has seen us downgrade our estimates, mainly for gasoline”
On Thursday, international benchmark crude futures traded at approximately $45 while the U.S West Texas Intermediate futures traded at approximately $42. To date, oil prices have fallen by 25 percent.
"The northern hemisphere summer is normally the peak season for air travel, but this year's slow take-up indicates demand may remain suppressed for a while," said the IEA while suggesting that global travel will be muted in the coming months.
It added that "Business travel will remain severely curtailed globally until a vaccine is found, while leisure travel will mainly be limited to domestic trips and short-haul flights."
With the recent implementation of remote working, there is less of a need to travel and hence, business travel "will struggle to recover to pre-COVID-19 levels due to the success of video conferencing and to broad efforts to cut operating costs," said the IEA.