Coronavirus may shrink global oil demand: IEA

"This is especially true in China, the largest energy consumer in the world, which accounted for more than 80 per cent of global oil demand growth last year. While the repercussions of the virus are spreading to other parts of the world, what happens in China will have major implications for global energy and oil markets."

Global oil demand is expected to decline in 2020 as the impact of the new coronavirus (COVID-19) spreads around the world, Photo: Pixabay

Global oil demand is expected to decline in 2020 as the impact of the new coronavirus (COVID-19) spreads around the world, constricting travel and broader economic activity, the International Energy Agency`s (IEA) oil market forecast said on Monday. The situation remains fluid, creating an extraordinary degree of uncertainty over what the full global impact of the virus will be.

In the IEA`s central base case, demand this year drops for the first time since 2009 because of the deep contraction in oil consumption in China, and major disruptions to global travel and trade.

"The coronavirus crisis is affecting a wide range of energy markets, including coal, gas and renewables, but its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels," said Fatih Birol, the IEA`s Executive Director.

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"This is especially true in China, the largest energy consumer in the world, which accounted for more than 80 per cent of global oil demand growth last year. While the repercussions of the virus are spreading to other parts of the world, what happens in China will have major implications for global energy and oil markets."

The IEA now sees global oil demand at 99.9 million barrels a day in 2020, down around 90,000 barrels a day from 2019. This is a sharp downgrade from the IEA`s forecast in February, which predicted global oil demand would grow by 825,000 barrels a day in 2020. The short-term outlook for the oil market will ultimately depend on how quickly governments move to contain the coronavirus outbreak, how successful their efforts are, and what lingering impact the global health crisis has on economic activity.

To account for the extreme uncertainty facing energy markets, the IEA has developed two other scenarios for how global oil demand could evolve this year. In a more pessimistic low case, global measures fail to contain the virus, and global demand falls by 730,000 barrels a day in 2020.

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In a more optimistic high case, the virus is contained quickly around the world, and global demand grows by 480,000 barrels a day.

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