The International Energy Agency raised its forecast for world oil demand in 2020 but warned that the recent surge in COVID-19 cases could threaten the recovery from the sharp decline in the first half of the year.
In its latest monthly report, the IEA said it is now projecting demand will fall by 7.9 million barrels this year to 92.1 million barrels a day, an improvement of 400,000 barrels from its last forecast. It is also forecasting a recovery in 2021 to 97.4 million barrels a day.
The increase in the 2020 forecast “is mainly because the decline in 2Q20 was less severe than expected,” the IEA said.
Global oil demand fell by 16.4 million barrels a day in the second quarter as consumers were confined to their homes due to COVID-19 lockdowns.
However, the IEA also noted that in some regions, including North and Latin America, countries are reinstating lockdowns amid an increase in COVID-19 cases.
“While the oil market has undoubtedly made progress since ‘Black April’, the large, and in some countries, accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside,” the IEA warned.
As Barron’s reports, the second half of 2020 is “looking murkier because the U.S. and other countries have failed to contain the coronavirus and areas are now being forced to slow the reopening. Unless current trends reverse, the agency’s next update is more likely to be negative than positive.”
Rystad Energy oil analyst Luise Dickson said the improvement in traffic patterns in the U.S. over the past two months “has now stalled and we see again reduced traffic and gasoline demand throughout the southern states and the mid-continent.”
On the supply side, the IEA reported that global oil production fell sharply in June to stand 13.7 million barrels per day below the April level, reflecting a high compliance rate with the OPEC+ supply agreement supplemented by substantial market-driven cuts, mainly in the U.S.