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The IEA lowers demand outlook for 2020 due to rising coronavirus cases

Oilfield workers with Wisco work on a pump jack in North Dakota, United States, on November 6, 2013.

Ken Cedeno | Corbis News | Getty Images

LONDON – The International Energy Agency cut its forecast for oil demand growth for 2020 on Tuesday, citing an “insidious” path ahead between weakening market sentiment and an increase in the number of cases of coronaviruses reported around the world.

In a carefully observed monthly report, the IEA reduced its forecast for global oil demand growth to 91

.7 million barrels per day. This marks a contraction of 8.4 million barrels per day year on year, more than the contraction of 8.1 million barrels per day predicted in the August report from the Paris-based energy agency.

“We expect the recovery in oil demand to decelerate significantly in the second half of 2020, with most of the easy gains already achieved,” the IEA said.

“The economic slowdown will take months to completely reverse course, while some sectors such as aviation are unlikely to return to pre-pandemic consumption levels next year.”

On Tuesday morning, the international benchmark for Brent crude was trading at $ 40.21 a barrel, up about 1.5%, while US West Texas Intermediate (WTI) crude settled at $ 37.90. about 1.7% more.

Oil prices have fallen by around 40% since the beginning of the year.

“I think the main message we conveyed in the report is that sentiment seems to be weakening,” Neil Atkinson, head of the IEA’s oil industry and markets division, told CNBC’s Street Signs Europe on Tuesday.

“We have seen very, very limited oil prices from the middle to the last part of June, between $ 40 and $ 45 a barrel for Brent. But, only recently have we seen $ 40 a barrel tested and it seems that the rebound of the recovery is starting to slow down. “

Atkinson said the rise in coronavirus cases across Europe, in particular, reflects “a cause for concern”, before adding, “It looks like we’re not out of the woods yet.”

Renewed weakness

The report comes shortly after OPEC cut its forecast for oil demand growth in 2020, citing a weaker-than-expected recovery in India and other Asian countries. The oil-producing group also warned on Monday that risks would remain “high and on the downside” for the first half of 2021.

The IEA echoed this sentiment on Tuesday, saying that “renewed weakness” in India reflects a cause for concern. However, China, which exited the bloc earlier than other major economies, continued to recover “strongly,” the group said.

Energy market participants have become increasingly anxious about a faltering economic recovery and stumbling fuel demand in the wake of the coronavirus pandemic.

The global health crisis coincided with an unprecedented energy demand shock this year, with the IEA previously warning that the drop in oil demand growth in 2020 may be the largest in history.

Looking ahead, the IEA said it expects world oil demand to grow by around 5.5 million barrels per day next year, reaching an average of 97.1 million barrels per day in 2021.

To date, more than 29.2 million people have contracted Covid-19 worldwide, with 928,576 related deaths, according to data collected by Johns Hopkins University.

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