Worldwide oil demand is expected to contract this year for the first time since 2009, a time of a global financial crisis, as the coronavirus (COVID-19) pandemic continues to take a toll on China while worsening elsewhere.
In its latest monthly forecast for the oil market, the International Energy Agency (IEA) said it had cut its projection for 2020 by 1.1 million barrels per day (bpd).
“For the first time since 2009, demand is expected to fall year-on-year, by 90,000 bpd,” the IEA’s Oil Market report said.
The report noted that, in the first quarter, China’s demand fell by 1.8 million bpd while global demand plunged 2.5 million bpd. “We assume that oil demand returns to close to normal in the second semester of 2020,” it added.
Since late January when analysts started noting the effects of COVID-19 on the oil market, pump prices of diesel in the Philippines have gone down by a six times in seven weeks for at a cumulative P5.25 a liter.
At the same time, pump prices of gasoline went down five times in seven weeks for a total of P4.15 a liter.
The IEA also said that the impact of COVID-19 on the global economy was becoming more apparent, with estimates on growth for 2020 being revised downward.
The Paris-based group said the Organization for Economic Cooperation and Development has lowered its estimate by 0.5 percentage point to 2.4 percent. This revision is factored in IEA’s latest projections.
“While the situation remains fluid, we expect global oil demand to fall in 2020—the first full-year decline in more than a decade—because of the deep contraction in China … and major disruptions to travel and trade,” the IEA said.
In a statement, IEA executive director Fatih Birol said virus crisis was also affecting other energy markets, such as coal, gas and renewable energy, but the impact was worst on oil because this was preventing the movement of people and goods—dealing a heavy blow on demand for transportation fuel.
“This is especially true in China, the largest energy consumer in the world, which accounted for more than 80 percent of global oil demand growth last year,” Birol said. “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.”