BAKU, Azerbaijan, March 11
By Leman Zeynalova – Trend:
The oil demand effects from COVID-19 will diminish by the third quarter of 2020, according to the March Short-Term Energy Outlook released by EIA.
Both lower assumed global economic growth and reduced global travel contribute to EIA’s forecast of 0.4 million barrels per day (b/d) for global oil demand growth in 2020, a reduction from the January STEO forecast of 1.3 million b/d (EIA’s January STEO did not include COVID-19-related demand effects), Trend reports.
Most of the reduction is in China, where EIA lowered expected growth for 2020 to 0.1 million b/d, down from a forecast of 0.5 million b/d in the January STEO.
EIA also made significant downward revisions to the demand forecasts for Japan, South Korea, and Italy.
The reduced demand forecast has three main drivers: lower assumptions of economic growth, less expected air travel, and other reductions in demand not captured by these two categories. Based on forecasts from Oxford Economics, EIA reduced its assumption for 2020 global oil-weighted growth in gross domestic product (GDP) to 2.1 percent from the assumption of 2.4 percent in the January STEO.
Updated information on flight cancellations also led EIA to revise its assumptions for the direct loss of jet fuel consumption from reduced air travel in the first and second quarters of 2020.
Finally, EIA assumes additional lost oil demand not captured by GDP and air travel.
“Notable among these factors are more lost demand in China’s petrochemical sector and more lost demand from road travel in China. However, these estimates are based on preliminary data, along with assumptions about the severity and duration of effects on oil demand, in the absence of actual data,” reads the report.
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