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The Oil Industry Continues to Be Depressed with Demand Falling to 1995 Levels

According to the latest IEA report, the global oil demand will decline at a record speed of 9.3 million barrels / day in 2020, which is due to the stagnation of personnel flow in 187 countries and regions. "Even if travel restrictions ease in the second half of the year, we expect global oil demand this year to still be 9.3 million barrels per day less than in 2019, erasing nearly a decade of growth." In addition, oil demand is expected to decrease by 29 million barrels per day in April compared with the same period last year, to the level in 1995.

The IEA's director, Birol, said this month could be the most miserable month ever for the oil industry. "A few years later, when we look back at 2020, we are likely to find that this is the most miserable year in the history of the global oil market," Birol told the media in a conference call after the IEA released its monthly report. "In that terrible year, the second quarter is likely to be the most miserable quarter. In that quarter, April is probably the most miserable month - it could be the black April in the history of the oil industry. " He also said that this year's carbon emissions may fall sharply, but it is not worth celebrating because it reflects the economic downturn.

As we all know, OPEC represents the oil producing countries, and IEA is the economic joint organization among the governments of oil consuming countries. IEA monthly crude oil market report is one of the authoritative reports of the three major oil organizations. OPEC monthly report, IEA monthly report and EIA weekly (monthly) report may all have an impact on the trend of oil prices, so it is quite concerned by the market.

Forecast curve of negative growth of global oil demand from January to November 2020

The grey curve represents the change of global demand, the Yellow column represents the change of demand in Europe, the green column represents China, the light blue represents India, and the dark blue green represents the United States. All illustrations in this article are from the latest monthly report of the International Energy Agency on oil market.

The report said the double impact of demand and supply led to a 40% drop in crude oil futures prices in March. IEA expects oil demand to fall 29 million barrels per day in April from a year earlier and another 26 million barrels per day in May. In June, although demand will still be 15 million barrels / day lower than the same period of the previous year, the market gradually began to recover. There is no viable deal to cut enough oil supply to offset short-term demand collapses. In the second quarter of 2020, oil demand is expected to decrease by 23.1 million barrels / day year-on-year. Oil demand will gradually improve in the second half of the year, but the demand in December will still fall 2.7 million barrels / day year on year.

Low oil prices threaten the stability of the oil industry, which will remain the core of the global economy. IEA expects exploration and development companies' capital expenditure to fall 32% year-on-year to $335 billion in 2020, the lowest level in 13 years.

Due to the sharp contraction of fuel demand, global refining production will drop by 7.6 million barrels / day to 74.3 million barrels / day in 2020. Global refining production is expected to decline by 16 million barrels / day in the second quarter as production cuts and production stops are widespread, but inventories will still increase by 6 million barrels / day. In the second half of 2020, refining activities will recover slowly.

OPEC + alliance production reduction plan (left) and expected production reduction of other major oil producing countries (right)

IEA expects an unprecedented 12 million barrels / day drop in global oil supply in May, following OPEC +'s historic cut in production.

Global oil supply trend

"The output measures announced by OPEC and G20 member countries cannot immediately restore the market balance. But by pulling down the peak of excess supply and flattening the curve of inventory growth, production cuts help complex oil systems digest the worst part of the crisis. The impact of the crisis on the oil market remains very uncertain in the short term. " The report says.

IEA believes that the historic decisions of OPEC + and G20 will help pull the oil industry back from the brink. The actions of Member States will affect the oil market in three aspects.

First of all, due to the high production in April, the effective production reduction in May will reach 10.7 million barrels per day instead of 9.7 million barrels per day. This will allow the market to take a breather from the oversupply in the coming weeks and reduce the peak inventory. Second, China, India, South Korea and the United States are considering using the decline in oil prices to increase strategic reserves, or to provide the oil industry with war storage space to temporarily store excess oil, which will increase additional space for the industry's high inventory; third, according to IEA, due to the fall in oil prices, other oil producing countries (especially the United States and Canada) may reduce their daily production in the next few months by 3 500 thousand barrels.

An ideal scenario would be for global oil demand to overtake supply by the second half of 2020 if production does decline significantly, some oil enters strategic reserves and demand begins to recover.

The historic OPEC + alliance cut in production ahead of Monday's crude oil opening brought optimism to the market, but only for a day. When pessimism is spreading again and crude oil futures are in a downturn, the monthly crude oil market report released by the International Energy Agency (IEA) on April 15 hit the head of the international oil price, and WTI crude oil futures once again fell below $20 / barrel, breaking the new 18 year low.