The International Energy Agency (IEA) said it expects to see a historic drop in global oil demand this year due to the coronavirus pandemic, but forecasts a swift recovery on 2021, citing three factors that will boost demand for crude.
In its closely-watched oil market report released on Tuesday, the agency headed by Fatih Birol (pictured) said it expects oil demand to plunge by around 8.1 million barrels per day for the rest of 2020, the largest fall in history, as global oil demand has been hit by lockdown measures and business shutdowns around the world.
This forecast is slightly better than the one provided a month ago, as the IEA raised its 2020 forecast by 500,ooo barrels per day, up from an 8.6 million barrels per day slump it expected in May.
Meanwhile, the Paris-based industry body also forecasts a swift comeback for oil in 2021, when it expects a surge in the demand for crude of around 5.7 million barrels per day, citing a higher intake from China, a high percentage of compliance of recent Opec+ cuts, and large voluntary production cuts from non-Opec G-20 countries, such as the US and Canada.
Oil prices have approached the $40 mark in June but have failed to sustain their gains over the past few days, as fears of a potential second wave of the coronavirus in the US and China have resurfaced.
One of the elements holding back the price of crude is a weak outlook from the aviation industry, one of biggest users of oil, as the outbreak has forced airlines to cut flights and operations around the world to the bone, with no signs of a recovery yet on the horizon.
The IEA said that the oil market may be approaching the “close to the half time mark”, emphasizing that a continuation of these recent trends could provide a stable foothold for an increased pace in the industry’s recovery from what has been an unprecedented blow.