BAKU, Azerbaijan, April 15
By Leman Zeynalova – Trend:
Global capital expenditure by exploration and production companies in 2020 is forecast to drop by about 32 percent versus 2019 to $335 billion, the lowest level for 13 years, Trend reports citing the Oil Market Report of the International Energy Agency (IEA).
This reduction of financial resources also undermines the ability of the oil industry to develop some of the technologies needed for clean energy transitions around the world, reads the report.
Looking beyond the immediate imbalances in the market, the IEA pointed out to the G20 energy ministers that although low prices might appear to be attractive to consumers, they are of little benefit to the approximately 4 billion people living under some form of Covid-19 lockdown.
“Also, low prices impact the livelihood of millions of people employed along the oil industry’s extensive value chain, and they damage the economies of weaker producing countries where social stability is already fragile. Low prices threaten the stability of an industry that will remain central to the functioning of the global economy. Even with demand falling by a record amount this year, oil companies still face the challenges of investing to offset natural production declines and to meet future growth,” said the IEA.
The agency estimates that global oil demand is expected to fall by a record 9.3 mb/d year-on-year in 2020.
“The impact of containment measures in 187 countries and territories has been to bring mobility almost to a halt. Demand in April is estimated to be 29 mb/d lower than a year ago, down to a level last seen in 1995. For 2Q20, demand is expected to be 23.1 mb/d below year-ago levels. The recovery in 2H20 will be gradual; in December demand will still be down 2.7 mb/d y-o-y. “
Global oil supply is set to plunge by a record 12 mb/d in May, after OPEC+ forged a historic output deal to cut production by 9.7 mb/d from an agreed baseline level, according to the report.
“As April production was high, the effective cut is 10.7 mb/d. Additional reductions are set to come from other countries with the US and Canada seeing the largest declines. Total non-OPEC output falls could reach 5.2 mb/d in 4Q20, and for the year as a whole output may be 2.3 mb/d lower than last year. “
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