PARIS–Worldwide, the demand for oil is set to contract for the first quarter of 2020, the first drop in more than 10 years, according to the International Energy Agency (IEA), CNBC reports. The decreased demand comes as China experiences a slowdown of its economy amid the spreading coronavirus, which has impacted business across the globe.
IEA predicts demand will decline by 435,000 barrels a day (b/d) during the year’s initial quarter, less than 2019’s first quarter. The anticipated decrease led the agency to slash its annual growth estimates to 825,000 barrels a day, the lowest forecast since 2011.
Brent crude prices dropped to under $55 a barrel last month, but prices have inched up this week on speculation that OPEC and non-OPEC producers might slash global oil output as a countermeasure to the deceleration in demand. Yesterday, Brent crude reached $55.08 per barrel while U.S. West Texas Intermediate traded at $50.71 per barrel.
“From the point of view of the producers, before the Covid-19 [coronavirus] crisis the market was expected to move toward balance in the second half of 2020 due to a combination of the production cuts implemented at the start of the year, stronger demand and a tailing off of non-OPEC supply growth. Now, the risk posed by the Covid-19 crisis has prompted the OPEC+ countries to consider an additional cut to oil production,” IEA said.