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Opec forecast that global oil demand will shrink by 9.1 million barrels per day to reach 90.06m bpd in 2020 but anticipates a recovery in demand during the second half of the year.
Demand fell by 6.4m bpd in the first quarter of the year, compared to the same period last year, while the second quarter saw 17.3m bpd of contraction. "The Covid-19 pandemic has negatively pressured economic momentum and eliminated potential for global oil demand growth,” Opec said in its monthly oil market report on Wednesday.
Its forecast comes ahead of a joint ministerial monitoring committee meeting of Opec+, the alliance headed by Saudi Arabia and Russia. The group earlier this month extended historic production cuts of 9.7m bpd until the end of July. Opec+ came to an agreement in April to keep cutting back production in a tapered manner until April 2022.
The move came after a record energy demand crunch in April as lockdown measures imposed by countries to contain the coronavirus pandemic dented the consumption of fuel. Oil prices also took a turn for the worse, with one benchmark, the West Texas Intermediate plunging below zero to briefly trade at -$40 per barrel in April.
"Lockdowns in various countries, particularly the US, Europe, India and the Middle East, are projected to reduce demand for gasoline and jet fuel, as air travel activity — in addition to reduced distances travelled — is projected to significantly decline compared with last year,” Opec said in its latest report. "A reduction in manufacturing activities compared with last year will also limit industrial fuel requirements.”
The second half of the year could see some recovery, Opec said. Its forecasts suggest that the decline in oil demand is expected to range at 6.4m bpd for the second half of the year, compared to 11.9m bpd in the first half of 2020.
"Transportation fuels are forecast to remain under pressure in [the second half of 2020], despite ongoing easing in lockdown measures,” the report said.
Aviation fuel demand will continue to be under pressure as outlook for long haul travel remains weak. Meanwhile, consumption of gasoline will remain constrained due to high unemployment, especially in the US, and owing to reduced commuting.
Oil demand in the Organisation of Economic Co-operation and Development region is expected to plummet by 5.2m bpd, while the non-OECD countries, are likely to see demand fall sharply by 3.9m bpd for the first time on record.
Oil prices rose on Wednesday after inventory data showed a big drop in U.S. crude stocks although gains were capped by concerns over fuel demand with mounting global COVID-19 cases.
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