IEA raises 2020 oil demand forecast but warns COVID-19 clouds outlook

The easing of lockdown measures in many countries caused a strong rebound to fuel deliveries, the International Energy Agency said. (AFP file photo)
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Updated 11 July 2020

IEA raises 2020 oil demand forecast but warns COVID-19 clouds outlook

  • Saudi Arabia cuts production by 1 million barrels per day more than required under OPEC+ deal
  • Easing of lockdown measures in many countries caused a strong rebound to fuel deliveries

LONDON: The world will need more oil this year than previously thought, according to the International Energy Agency (IEA).The Paris-based body boosted its forecast to 92.1 million barrels per day (bpd), up by 400,000 bpd from its last outlook report published in June. 

Still, the spread of the coronavirus pandemic remains a significant threat to the energy sector.

“While the oil market has undoubtedly made progress since “Black April,” the large — and in some countries accelerating  — number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside,” the IEA said in its report.

World oil demand is projected to decline by 7.9 million bpd in 2020 and to recover by 5.3 million bpd in 2021. 

FASTFACT

7.9 million

World oil demand is projected to decline by 7.9 million bpd in 2020.

Futures markets are betting that the oil market will move from substantial surplus in the first half of the year to a deficit in the second half.

But for refiners, any benefit from improving demand is likely to be offset by expectations of much tighter feedstock markets ahead, the IEA said. 

Global oil supplies fell sharply in June as the group known as OPEC+, which includes the Organization of the Petroleum Exporting Countries (OPEC) and other countries including Russia, agreed to slash production.

The compliance rate, that is the degree to which countries meet their production cut commitments, was 108 percent. This included over-performance by Saudi Arabia which cut production by 1 million bpd more than required, reducing OPEC crude output to its lowest point in nearly three decades. 

In the US, oil production has tumbled as shale producer struggle to pump profitably as prices weaken.

Total US oil production fell by nearly 1 million bpd in April compared with March. The IEA expects that May and June will see further month-on-month falls of 1.3 million bpd and 0.5 million bpd, respectively. 


Turkey on brink of recession as economy collapses

Updated 13 August 2020

Turkey on brink of recession as economy collapses

  • Consumer debt has increased by 25 percent to more than $100 billion in the past three months

JEDDAH: President Recep Tayyip Erdogan’s popularity is plunging in lockstep with Turkey’s collapsing economy and the country is on the verge of a potentially devastating recession, financial experts have told Arab News.
The value of the Turkish lira has fallen to 7.30 against the US dollar and the central bank has spent $65 billion to prop up the currency, according to the US investment bank Goldman Sachs.
Consumer debt has increased by 25 percent to more than $100 billion in the past three months as the government moved to help families during the coronavirus pandemic, but the result has been a surge in inflation to 12 percent.
With the falling lira and increased price of imported goods, the living standards of many Turks who earn in lira but have dollar debts have fallen sharply.
The economy is expected to shrink by about 4 percent this year. The official unemployment rate remains at 12.8 percent because layoffs are banned, although many experts say the real figures are far higher.
To complete the perfect storm, tourism revenues and exports have been decimated by the pandemic, and foreign capital has fled amid fears over economic trends and the independence of the central bank.
Wolfango Piccoli, of Teneo Intelligence in London, said logic dictated an increase in interest rates but “this is unlikely to happen.”
Piccoli said central bank officials would strive to avoid an outright rate hike at their monetary policy meeting on Aug. 20. “A mix of controlled devaluation and backdoor policies, such as limiting Turkish lira’s liquidity, remains their preferred approach,” he said.
There is speculation of snap elections, and Erdogan’s view is that higher interest rates cause inflation, despite considerable economic evidence to the contrary.