An Indian Oil Petrol Pump employee is seen wearing a face shield, as he fuels a customer’s vehicle in an open Petrol Retail Outlet of Kolkata during the Covid-19 pandemic.
Avishek Das | SOPA Images | LightRocket via Getty Images
The International Energy Agency said on Tuesday that it expects the fall in oil demand this year to be the largest in history, but believes there are signs the market could reach “a more stable footing” over the coming months.
Oil prices have tumbled around 40% year-to-date, as lockdown measures designed to slow the spread of the coronavirus created an unparalleled demand shock in energy markets.
The IEA said oil demand in the second quarter, which saw the greatest impact from lockdown measures, was 17.8 million barrels per day lower when compared to the same period last year. That level of demand reduction was slightly less than the group had previously expected, although still unprecedented.
In its closely-watched oil market report, the Paris-based energy agency said on Tuesday that demand was expected to fall by 8.1 million barrels per day in 2020, before growing by 5.7 million barrels per day in 2021.
It means the expected drop in oil demand this year amounts to the largest in history, the IEA said, with the demand rise in 2021 forecast to be the largest one-year jump ever recorded “as activity begins to return to normal across vast swathes of the economy.”
Meanwhile, the IEA’s forecast for oil demand in 2020 is 91.7 million barrels per day, nearly 500,000 barrels higher per day than it expected in May, due to stronger-than-anticipated deliveries during the coronavirus lockdown.
“In sporting terms, the 2020 oil market is now close to the half time mark,” the IEA said. “So far, initiatives in the form of the OPEC+ agreement and the meeting of G20 energy ministers have made a major contribution to restoring stability to the market.”
“If recent trends in production are maintained and demand does recover, the market will be on a more stable footing by the end of the second half. However, we should not underestimate the enormous uncertainties,” the group added.
OPEC and non-OPEC allies — an oil producer group sometimes referred to as OPEC+ — agreed earlier this month to extend record output cuts of 9.7 million barrels per day through July.
As part of the deal, key members of the energy alliance have insisted that those who have not been complying make up their commitments over the coming weeks.
The move has helped to prop up oil prices, although concerns persist over the threat to fuel demand from the resurgence of new coronavirus infections across the globe.
IEA Executive Director Fatih Birol told CNBC’s “Street Signs Europe” on Tuesday that a modest oil market recovery was being driven by three factors: China’s strong exit from lockdown measures; a “very good” compliance among OPEC+ members; and the decline of production in the U.S.,…