Opec said today that it expects an "historic decline" in 2020 global oil demand to reflect the effect of the Covid-19 pandemic on consumption. It marks a drastic revision from its previous demand projection.
Opec's latest Monthly Oil Market Report (MOMR) now forecasts that global oil demand will fall by 6.85mn b/d this year to 92.82mn b/d. Its previous MOMR projected demand would grow by 60,000 b/d in 2020.
Opec expects the second quarter to see the largest contraction in oil demand, at around 12mn b/d compared with the same quarter last year. It says this will ease to a decline of around 6mn b/d in the third quarter, and 3.5mn b/d in the fourth quarter.
Opec's decline estimates are more conservative than those of the IEA, which said yesterday that it expects a 23.1mn b/d year-on-year fall in second-quarter demand, and a 9.3mn b/d drop in 2020 overall. But Opec said there is the possibility of further adjustments, especially in the second quarter.
Opec has lowered its forecast for the call on its members' own crude to 24.5mn b/d this year, down by 5.4mn b/d from last year and below the estimated 28.2mn b/d in its previous MOMR.
Opec crude production was 28.61mn b/d in March, according to an average of secondary source estimates, including Argus.
But Opec supply is set to decline in coming months after the 23-country Opec+ coalition agreed on 12 April to reduce crude output by 9.7mn b/d in May-June. Production cuts will be adjusted to 7.7mn b/d in July-December and to 5.8mn b/d from January 2021-April 2022. Output will be reduced from each member country's October 2018 baseline, with the exception of Saudi Arabia and Russia, which will have an 11mn b/d reference level.
Opec has revised its forecast for non-Opec supply this year down by a "considerable" 3.26mn b/d from its previous projection, to 63.47mn b/d. This is a decline of 1.5mn b/d from 2019. The decline is led by a downward revision to US supply, which Opec expects to fall by 150,000 b/d on the year.
"Benchmark oil prices have plunged below the cost of production in most fields across the globe, prompting companies to respond by cutting capital expenditure (capex). The expected decline in upstream investment will make this year's capex volumes, estimated at about $450bn, the lowest in 13 years," Opec said. It previously expected upstream capex to remain flat on the year.
In 2020, growth in oil supply is so far only forecast for Norway, Brazil, Guyana and Australia.
Citing preliminary data, Opec said OECD commercial oil stocks rose by 5.6mn b/d in February to 2.95bn bl, up by 64.3mn bl from a year earlier and 24.7mn bl above the five-year average.
