The International Energy Agency (IEA) has revised its forecast for oil demand in 2020. According to the organization’s report published on Thursday, May 14, according to the results of the year, energy consumption in the world will be reduced by only 8.6 million barrels per day. Earlier, the IEA expected a decrease of 9.3 million.
Agency specialists improved their assessment against the background of weakened quarantine measures in a number of countries. According to IEA estimates, by the end of May, under the conditions of restrictions, about 2.8 billion people will live in the world, compared with 4 billion in April. According to experts, the gradual return of people and enterprises to work over time should lead to a restoration of global demand for fuel.
At the same time, the expected opening of borders between states may provide additional support to the global energy market by the end of the year. This was in an interview with RT, said the analyst of Finam Group Alexei Kalachev.
“The authorities of some states have already lifted restrictions on the movement of vehicles within the country, and also stopped the regime of self-isolation of citizens. Such a policy has led to an increase in energy demand, which is reflected in the latest IEA forecast. At the same time, the lifting of the border crossing ban will have an even greater positive effect and significantly spur the consumption of energy raw materials, including oil, ”the analyst emphasized.
Note that global investors reacted positively to the updated IEA forecast. So, during the trading on Thursday, the price of Brent benchmark oil on the ICE exchange in London at the moment grew by 6.5% - up to $ 31.3 per barrel. Energy raw materials of the American grade WTI went up by 8.6% to $ 27.8 per barrel.
In addition to the expected recovery in demand, market players positively assess state measures to reduce global hydrocarbon supply. Recall, from May 1, to combat the global overabundance of oil, the countries participating in the OPEC + transaction, including Russia, began to reduce the production of raw materials by 9.7 million barrels per day. A decrease in production also began in several other countries - exporters of raw materials, including the USA, Norway, Argentina and Canada.
“Countries that have not acceded to the OPEC + agreement significantly reduce oil production, moreover, at a faster pace than expected. In April, this group of countries led by the United States and Canada reduced oil production by 3 million barrels per day compared to the beginning of the year. In June, the reduction may reach 4 million barrels per day, and may continue in the future, ”the IEA report says.
According to the agency’s estimates, in May the supply of oil on the world market should decrease by 12 million barrels per day and reach the minimum level over the past nine years - 88 million barrels per day. In the following months, the total reduction in production by world hydrocarbon producers may reach 15–20 million barrels per day. This was previously stated by the head of the Ministry of Energy of Russia Alexander Novak.
Moreover, on May 11, Saudi Arabia announced its intention to further reduce oil production by another 1 million barrels per day. At the same time, experts expect a significant decrease in US production.
“US production is falling faster than forecast due to the massive shutdown of drilling rigs. In the context of low oil prices, the work of many towers became unprofitable, which led to their forced closure. In fact, in April, US oil production fell by at least 650 thousand barrels per day, and in the near future it will decrease by another 1.2-1.3 million barrels per day, ”Vyacheslav Abramov, director of BCS Broker sales office, told RT .
According to the latest data from the oil service company Baker Hughes, since the beginning of spring the number of drilling rigs in the United States has more than doubled - to 292. The figure was the lowest since the fall of 2009.
Attention to stocks
According to Abramov, the emerging reduction in US oil reserves may also have a positive effect on the global energy market. For the week ended May 8, commercial reserves of raw materials in the United States unexpectedly decreased by 745 thousand barrels. The decline occurred for the first time since January 23. This is stated in the report of the American Energy Information Administration (EIA).
Recall that in April, the collapse of global demand for hydrocarbons due to coronavirus led to an almost full load of American oil storage facilities. As a result, it became impossible to make new deliveries of raw materials, and for the first time in history, the value of oil contracts fell to negative values.
“The beginning decline in energy reserves in the US oil storage facilities is due to the fact that restrictive measures are being lifted. As a result, Americans are starting to drive more cars, the holiday season begins. Now the vacation in the country will be even more relevant due to the closure of the borders, accordingly, the demand for gasoline is growing, thereby processing more crude oil. And, of course, a decrease in production contributes to a faster release of reserves, ”said Vyacheslav Abramov.
In general, according to RT experts surveyed, in the face of recovery in demand, as well as a decrease in oil production and oil reserves in the world, the cost of raw materials may recover to $ 40 per barrel by the end of the year. However, in many respects the situation will continue to depend on the situation with the coronavirus.
“With the further lifting of quarantine restrictions and the gradual recovery of the global economy, the price of Brent crude oil will increase and can reach $ 35 per barrel in the medium term. At the same time, by the end of the year, the cost of a barrel can be fixed at around $ 40–42, ”the expert added.