Coronavirus Cuts Deep into Global Oil Demand

The coronavirus may have a bigger impact on oil demand than previously thought. The Organization of Petroleum Exporting Countries released its latest Monthly Oil Market Report on Wednesday, and it forecasts a larger drop in demand than it did even last month.

The demand for oil is expected to drop by 9.1 million barrels per day in 2020, according to OPEC estimates. This is 9% lower than in 2019. OPEC forecasts that global oil demand will reach 90.6 barrels per day, about 100,000 barrels per day fewer than estimated in July.

OPEC also expects the global economy in 2020 will shrink by more than previously predicted. Analysis from the cartel forecasts that the global economy will shrink by 4.0% in 2020, down from 3.7% imagined in July. What’s more, the report warns that this is the optimistic prediction. If Covid has a strong resurgence, the economy could fall even further.

‘The forecast assumes that COVID-19 will largely be contained globally, with no further major disruptions to the global economy,’ OPEC noted. ‘The latest surge of infections in the U.S. will need to be closely monitored, as a continuation of this trend may lead to an erosion in rebounding consumer confidence and spending behavior.’

OPEC predicts that oil demand will rise by 7.0 million barrels per day in 2021.

In April, OPEC countries came together to cut production by 9.7 million barrels per day, as coronavirus crushed demand. The cartel has since relaxed restrictions to 7.7 million barrels per day. OPEC oil production grew by roughly 1 million barrels per day from June to July, to over 23 million barrels per day, according to some estimates.

According to OPEC’s report, production in Iraq has expanded by 39,000 barrels per day. Nigeria, on the other hand, is reported to have cut production by 38,000 barrels per day (though other sources believe the cuts to be smaller). Production in Saudi Arabia and Kuwait is also reported to have picked up.