PARIS • Global oil demand will plunge by a record 9 per cent this year due to coronavirus lockdowns, thwarting efforts by Opec+ to contain the resulting glut of crude, the International Energy Agency (IEA) said.
A decade of demand growth will be wiped out this year, when consumption will slump by just over nine million barrels a day, the agency said in its monthly report yesterday. April will suffer the hardest hit, with fuel use contracting by almost a third to the lowest level since 1995.
While production cuts agreed by the Opec (Organisation of Petroleum Exporting Countries) cartel and its partners at the weekend will bring about an unprecedented pullback in supply next month, facilities for storing the remaining surplus could be exhausted by the middle of the year.
"Never before has the oil industry come this close to testing its logistics capacity to the limit," said the Paris-based IEA, which advises most major economies on energy policy.
The collapse in demand is prompting a similarly sharp pullback in supply.
Saudi Arabia, Russia and other exporters in the Opec+ coalition announced they would collectively slash output by just under 10 million barrels a day over the next two months. This "should help bring the oil industry back from the brink of an even more serious situation than it currently faces", the IEA said.
Despite the efforts of Opec+, global inventories will still accumulate by 12 million barrels a day in the first half of the year, according to the agency. The glut "threatens to overwhelm the logistics of the oil industry - ships, pipelines and storage tanks - in the coming weeks", it warned.
Oil futures continued their fall in Asian trade yesterday, pressured by fears of collapsing demand and oversupply. Brent crude fell US$1.49, or 5 per cent, to US$28.11 a barrel as of 0827 GMT. US West Texas Intermediate crude slid 51 US cents, or 2.5 per cent, to US$19.60.
While Riyadh said the IEA would detail contribution to the Opec+ production cuts from other producers in the Group of 20 nations, the report published yesterday said these are still being worked out.
The IEA said that to relieve the pressure on storage tanks, China, India, South Korea and the United States are offering their strategic inventories for the industry to "temporarily park unwanted barrels". The four countries are considering topping up their own reserves while prices are low.
If these transfers go ahead, they could amount to 200 million barrels, effectively removing two million a day over a three-month period, according to the agency. The measures are not coming fast enough to rescue the global oil industry.
BLOOMBERG
