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IEA revises oil demand forecasts

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By Lucas Ajanaku

Oil demand in the year will decline by 8.4 million barrels per day (mbpd), according to the International Energy Agency’s (IEA’s) latest oil market report.

The figure marks a slight increase from the 8.1mbpd drop forecasted in the IEA’s previous report, which was released in August. In its September report, the organisation noted that a resurgence of Covid-19 cases in many countries, local lockdown measures, continued teleworking and the weak aviation sector led to downward revisions of its demand estimates for the third quarter and fourth quarter of this year of 0.1mbpd and 0.6mbpd, respectively.

Looking ahead to 2021, the IEA predicts that demand will grow by 5.5mbpd. Its previous report forecasted 2021 oil demand growth of 5.2mbpd. The IEA noted in its September report that China continues to recover strongly while India is showing renewed weakness.

“The uncertainty created by Covid-19 shows little sign of abating,” the IEA stated in its latest oil market report.

“As national lockdowns eased there was an initial sharp recovery in demand led by gasoline, but the curve has flattened out and it is becoming increasingly apparent that Covid-19 will stay with us for some time,” the IEA added.

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“With the on-coming northern hemisphere winter, we will enter uncharted territory regarding the virulence of Covid-19. In last month’s report, we said that the market was in a state of ‘delicate re-balancing’. One month later, the outlook appears even more fragile,” the IEA went on to say.

Commenting on the IEA’s latest oil market report, Michael Burns, an energy partner at law firm Ashurst, said: “The impact of Covid-19 on the global economy is more sustained than could have been predicted six months ago.”

“We are not out of the woods yet, but governments and industry have started making plans for a post-Covid-19 economic recovery, meaning that while conditions for the oil and gas industry are still challenging, there are signs of more optimism and pockets of activity, which will hopefully increase over the coming months,” he added.

As of September 15, there have been 29.1 million confirmed cases of Covid-19, with 926,544 deaths, according to the latest information from the World Health Organisation (WHO). The worst affected region as of September 15, in terms of confirmed cases and deaths, is the Americas, WHO data shows.

The IEA oil market report is one of the world’s most authoritative and timely sources of data, forecasts and analysis on the global oil market, according to the IEA. August’s report saw the IEA’s first oil demand downgrade in several months, which the organisation said reflected “the stalling of mobility as the number of Covid-19 cases remains high and weakness in the aviation sector”.

Created in 1974, the IEA works with governments and industry to shape a secure and sustainable energy future for all, according to its website. Based in France, the organisation is led by Executive Director Fatih Birol.

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