Second COVID-19 wave in Eurozone poses threat for Kazakhstan's oil market - WB

Business Materials 18 February 2021 17:32 (UTC +04:00)
Second COVID-19 wave in Eurozone poses threat for Kazakhstan's oil market - WB

BAKU, Azerbaijan, Feb. 18

By Nargiz Sadikhova - Trend:

The COVID-19 pandemic has dealt a blow to demand in Kazakhstan’s main trading partner economies, the World Bank (WB) told Trend.

The WB said that the COVID-19 pandemic has hit hard Kazakhstan’s main trade counterparts with a sharp decline in demand, interrupting commodity markets and supply chains. After plunging in the second quarter by 11.8 percent, GDP in the euro area has shown firming activity with 12.6 percent growth in the third quarter, because many member countries lifted the pandemic-linked restrictions.

“But, the recent rise in cases and re-introduction of the tough lockdowns has slowed the recovery pace. Strong policy support and an acceleration in infrastructure investments pushed up industrial production in China, and activity normalized faster than expected. GDP in China grew by 3.2 percent in the second quarter of 2020, with a much stronger path for recovery in the following quarters than for other export destinations,” the WB said.

Russia’s GDP contracted by 8 percent in the second quarter of 2020 against a backdrop of already weak external context and restrictions that hindered domestic activity, the WB noted.

While growth in Russia began to gradually rebound recently, thanks to accommodative monetary policy and relaxation of fiscal rules, it is expected to be slow due to depressed oil prices and compliance with OPEC+ oil production cuts. The global oil market was hurt by a combination of weaker demand, triggered by the pandemic, and rising oil supply.

“Restrictions and lockdown across the globe to curb the spread of the virus have led to a sharp fall in travel and transport, which account for two-thirds of oil consumption. Oil prices plunged in March 2020 to a 17-year low of roughly $25 per barrel. To rebalance the market in response to a demand collapse, the OPEC+ partner countries, which together produce more than half the global crude, agreed to cut production,” the WB said.

“Global consumption also picked up from its lows in 2Q2020. Following a precipitous fall in March through April in the wake of COVID-19, oil prices have bounced back and regained earlier losses. The recent positive news about vaccine development and hopes that demand will pick-up in travel and energy-intensive industries have helped to prop up oil prices,” the WB said.

However, a second wave of the virus and lockdowns in the Eurozone countries, the primary export market for Kazakhstan, still poses a threat to a speedy recovery in demand in the short run. Oil demand is expected to drop by an unprecedented 8.6 percent in 2020 – the largest decline on record, the WB said.


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