EIA slashes global oil demand outlook as virus spreads
Global oil demand should dive by 910,000 barrels per day (bpd) in the first quarter, the U.S. Energy Information Administration (EIA) forecast, as the rapid spread of coronavirus has slammed economic activity and travel, raising the specter of a global recession.
Oil prices slid 20% this week as top producers Saudi Arabia and Russia began a price war that threatens to overwhelm global oil markets with supply even as demand has slid.
Overall, the EIA still sees demand rising this year, a more optimistic forecast than Paris-based International Energy Agency (IEA), which predicted Monday that oil demand this year will post its first annual drop since the global financial crisis.
The EIA cut its world oil demand growth forecast for the year by 660,000 bpd, now seeing demand rising by 370,000 bpd to 101.2 million bpd. The Organization of the Petroleum Exporting Countries (OPEC) also slashed its forecasts for demand growth and warned of further downward revisions.
The bulk of the demand drop comes from China, where the coronavirus outbreak has taken a heavy toll on the economy and oil consumption is expected to fall by 480,000 bpd.
The EIA expects to see U.S. demand fall by 350,000 bpd in the first quarter, exceeding the previous estimated decline of 260,000 bpd. Overall U.S. demand for the year was expected to rise 60,000 bpd to 20.52 million bpd in 2020, a slight downgrade in its forecast.
U.S. crude oil production is expected to rise by 760,000 barrels per day (bpd) in 2020 to 12.99 million bpd, the EIA said, lowering its previous expectation for a rise of 960,000 bpd. It said it expected output in 2021 to drop to 12.66 million bpd, which would be the first U.S. contraction in output since 2016.
“We expect that lower forecast oil prices in mid-2020 will reduce U.S. drilling activity in late 2020 and in early 2021,” EIA Administrator Linda Capuano said in a statement.
The record pace of U.S. output growth has been slowing as companies pull back on spending on new drilling.
Reporting by Devika Krishna Kumar in New York Editing by Chizu Nomiyama and David Gregorio
Comments