Global Oil Demand To Shrink Further in 2020

The International Energy Agency estimates that in 2020 alone, oil and gas revenues for key producers will decrease by 50 to 85 percent, compared to 2019.

The Organization of the Petroleum Exporting Countries (OPEC) forecasted a year-on-year contraction of 9.8 million barrels a day, a downward assessment compared to the previous report.

The OPEC explained that that economic recovery has been slowest than expected amid the COVID-19 pandemic. “These downward revisions mainly take into account downward adjustments to the economic outlook in OECD economies due to COVID-19 containment measures, with the accompanying adverse impacts on transportation and industrial fuel demand through mid-2021,” the report highlights.

In September, the Organisation for Economic Co-operation and Development (OECD) warned that countries that are net exporters of oil are facing a “double blow.” On the one hand, the global oil market has collapsed because of the COVI-19 pandemic. The industry is also facing a “structural crisis,” as several countries are transitioning towards decarbonization schemes.

In this sense, the International Energy Agency estimates that in 2020 alone, oil and gas revenues for key producers will decrease by 50 to 85 percent, compared to 2019.

Moreover, the OECD notices that “many oil-producing developing countries are non-diversified, sector-dependent economies, with oil contributing the majority of their exports and government revenues.” Hence, “the current fall in oil prices is limiting the ability of these countries to respond to the multidimensional domestic pressures produced by the COVID-19 pandemic.”

On November 30 and December 1, OPEC countries will meet with other allies to reach an understanding on the future of oil production. The OPEC estimates that the global demand will grow by 6.2 million barrels per day in 2021. The organization had continuously downgraded its 2021 forecast since July when it estimated a recovery of 7 million.

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