IEA head: global oil demand plummets amid pandemic
US, WASHINGTON (ORDO NEWS) — World oil demand is currently in free fall due to a pandemic caused by a coronavirus disease, the situation is also exacerbated by the inability of Russia and Saudi Arabia to agree to reduce oil production.
Such an opinion was expressed on Thursday by the head of the International Energy Agency (IEA) Fatih Birol at a video conference of the Washington Atlantic Council on the situation with oil.
Many experts predict an oversupply of oil on the market, including due to the consequences of combating the spread of coronavirus. According to Birol, the consequences of a glut will be felt for many years to come. He expects demand recovery will not be quick.
“Today, 3 billion people in the world are isolated. As a result, global oil demand is in free fall, and we can see a drop in demand to as much as 20 million barrels per day,” the IEA head said, indicating that he would publish more specific forecasts in two weeks. on demand for oil.
In his view, the decline in demand “is likely to decline in the second quarter compared with the previous three months.” After Riyadh and Moscow could not agree, the supply in the oil market increased sharply.
According to Birol, “very soon” oil storage facilities around the world will fill up. He called on major oil producers to be more responsible. Birol also expects Saudi Arabia to play a constructive role and be able to stabilize oil markets.
Shale Oil Problems
At the same time, the head of the IEA predicts a significant decrease in shale oil production in the US, which “is likely to happen in the next quarter.” “With these prices, we will see a significant reduction in oil shale production in the United States, there is no doubt,” he added. Birol believes that the American oil industry is expected to “suffer tremendously.”
Nevertheless, the head of the agency points out that after the restoration of oil prices it will recover.
Birol also emphasized that gas demand in Europe and Asia “has suffered greatly.” He noted that exporters of liquefied natural gas (LNG), such as Australia, Algeria and Qatar, whose agreements are mainly related to oil prices, also face serious problems.
“I expect that LNG in the US will also be affected,” the IEA head said. “We can see a lot of closures [LNG plants] around the world.”
The head of the IEA advised taking measures to improve energy efficiency as part of economic stimulus programs. In addition, he said, in connection with the current situation, a reduction in greenhouse gas emissions is expected by the fall of this year.
Oil prices plummeted after Russia and Saudi Arabia failed to agree on a reduction in production after March, when current arrangements expire.
Moreover, the former allies intend to actively increase production in April. On March 26, the market showed negative dynamics against the backdrop of cheaper oil. May Brent crude futures fell 2.2% to $ 26.8 per barrel. WTI crude oil lost 3.4% and was trading at $ 23.66 a barrel.
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