There’s more evidence that the latest OPEC/Russia oil output agreement won’t see any significant change in prices for quite a while with the International Energy Agency (IEA) warning that 2020 will be “worst year in the history of global oil markets” and see an unprecedented collapse in demand and run-up in surplus crude.
That saw oil prices again weaken on Wednesday – not by as much as on Tuesday. Not helping was news that US oil stocks rose by another 19 million barrels in a week.
The IEA said in its monthly oil report that 2020 will see global demand for oil fall by the most ever due to the economic lockdowns enforced around the world to contain the coronavirus pandemic.
April will be the worst month this year with the IEA forecasting a 29 million barrel per day (BPD) dive in oil demand to levels not seen in 25 years.
The Agency warned output cuts by producers could fully offset the near-term falls facing the market. But the agency said the production cuts would help reduce the supply overhang and take some strain off storage facilities around the world.
West Texas Intermediate (WTI) crude for May delivery traded up by 7 cents, or nearly 0.4%, to $US20.18 a barrel, after dropping more than 10% Tuesday in New York.
WTI front-month contract prices fell to as low as $US19.20, the lowest intraday level since early 2002, according to FactSet data.
June Brent crude was down $US1.08, or 3.7%, to $US28.52 a barrel after a 6.7% fall on Tuesday in Europe.
The IEA said demand in 2020 would fall by an estimated 9.3 million barrels a day which is the equivalent to a decade’s worth of growth.
The agency said this month would be known as a “Black April” for the energy market, with demand is forecast to drop to its lowest since 1995.
“We may see it was the worst year in the history of global oil markets,” said Fatih Birol, the IEA’s executive director.
“In a few years’ time, when we look back on 2020 we may well see that it was the worst year in the history of global oil markets,” Birol told a reporters on a conference call after the IEA energy watchdog released its monthly report.
“During that terrible year, the second quarter may well have been the worst of the lot. During that quarter, April may well have been the worst month – it may go down as Black April in the history of the oil industry.”
“There is no feasible agreement that could cut supply by enough to offset such near-term demand losses. However, the past week’s achievements are a solid start,” he said.
As a result of last week’s rise, US oil inventories are now above 500 million barrels for the first time since 2017 and bound to rise further in coming weeks.
