The coronavirus outbreak is dealing a heavy blow to global oil demand, which is now expected to grow by just 480,000 bpd in 2020, compared to expectations of 1.1-million-bpd growth in December, OPEC said on Thursday.
It has therefore recommended a massive OPEC+ production cut of 1.5 million bpd in Q2 in response to the slump in demand.
“[T]he COVID-19 outbreak has had a major adverse impact on global economic and oil demand forecasts in 2020, particularly for the first and second quarters,” OPEC said on Thursday, adding that “Moreover, the unprecedented situation, and the ever-shifting market dynamics, means risks are skewed to the downside.”
This is OPEC’s second major downward revision of global oil demand growth for 2020 after the coronavirus outbreak.
In its February Monthly Oil Market Report (MOMR), OPEC had already slashed its global oil demand growth forecast for 2020, expecting the coronavirus outbreak to weigh heavily on fuel demand in the world’s oil demand growth driver, China.
OPEC slashed its oil demand growth estimate by 230,000 bpd from the previous month’s assessment and expected in mid-February global oil demand growth at just below 1 million bpd this year—at 990,000 bpd.
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Now the cartel sees this year’s demand growth at half the growth level it expected three weeks ago.
Other agencies and analysts have also significantly cut their oil demand growth outlooks amid the coronavirus outbreak.
Last month, the International Energy Agency (IEA) said in its Oil Market Report that the coronavirus outbreak would lead to the first quarterly contraction in global oil demand in more than 10 years.
The IEA slashed its 2020 oil demand growth forecast by 365,000 bpd to just 825,000 bpd—which would be the lowest oil demand growth since 2011.
The coronavirus outbreak could hit global oil demand growth more than currently expected, Fatih Birol, the executive director of the IEA said last week, adding that the agency could additionally trim its oil demand growth projections.
The EIA has also cut its oil demand growth forecast by 378,000 bpd for this year due to coronavirus outbreak.
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