COVID-19 causing first drop in oil use in decade: IEA

  • COVID-19 causing first drop in oil use in decade: IEA

COVID-19 causing first drop in oil use in decade: IEA

The agency said that the consequences of the outbreak for oil demand "will be significant".

US Energy Secretary Dan Brouillette told Reuters the coronavirus epidemic in China has had a marginal impact on energy markets and is unlikely to dramatically affect oil prices even if Chinese demand falls by 500,000 barrels per day.

The intergovernmental body known as the IEA expects demand to drop by 435,000 barrels per day in the first quarter of 2020 compared to a year before because of disruptions from the virus, which causes a disease recently given the name COVID-19.

In the second quarter it said it expected oil demand to grow 1.2 million barrels per day before normalizing in the third quarter with growth of 1.5 million bpd on likely economic stimulus measures in China.

The impact on demand for transportation fuels was exacerbated by the outbreak coinciding with the Lunar New Year holidays, when many Chinese return home to celebrate with family. "The crisis is ongoing and at this stage it is hard to be precise about the impact".

"While steps taken in China to reduce its spread were adopted earlier than in the SARS crisis and have been far more extensive, the profound transformation of the world economy since 2003 means China's slowdown today is bound to have a stronger global impact", it said in the report.

A similar drop in diesel demand is expected due to other travel restrictions. Any fall would represent the first quarterly decline in a decade.

The World Health Organization also reassured traders by saying the big jump in China's reported cases reflected a decision by authorities to reclassify a backlog of suspected cases, and did not necessarily indicate a wider epidemic. The cartel has cut production by a total of 1.7 million barrels per day since January 2017.

The agency cut its full-year global growth forecast to 825,000 bpd.

With markets hoping for OPEC+ to either deepen or extending oil output cuts, the WTI extended its rebound and rose above the $52 mark for the first time in February.