ON YOUR SIDE: Virus outbreak blamed for forecast fall in oil demand

Oil traders are betting the economic impact of the coronavirus would be short-lived

This will mark the first quarterly contraction in more than a decade and will have an impact on annual results, the IEA said in its oil market report, released on Thursday.

The Paris-based agency said Thursday in its oil market report for February that demand in the first quarter was expected to fall by 435,000 barrels per day compared with the same period a year ago.

The impact on demand for transportation fuels was exacerbated by the outbreak coinciding with the Lunar New Year holidays, when many Chinese return home to celebrate with family.

The IEA noted that since 2003 China has become more integrated in global supply chains, its tourism sector has dramatically expanded and Chinese are the largest contingent of world tourists, and the country's share of global GDP has jumped from 4 to 16 percent.

"There is already a major slowdown in oil consumption and the wider economy in China", the IEA said.

A similar drop in diesel demand is expected due to other travel restrictions.

The outbreak, which has led to the quarantine of more than 40 million people in China and sickened about 45,000 people worldwide while more than 1,100 have died, has led to scores of businesses temporarily closing their operations in China and airlines to ground flights to and from the country.

OPEC, at its December meeting, agreed to reduce output by an additional 500,000 barrels per day through the first quarter.

The IEA doesn't forecast changes in oil prices, but said consumers were unlikely to get much of a boost from cheaper petrol and diesel at the end of the day. Its oil demand has nearly doubled since 2003 and represented more than three-quarters of global oil demand growth previous year. Now management expects the oil production in the United States in 2020 will increase by 960 thousand barrels per day to a record 13.2 million barrels per day.

The new estimates show that oil markets face a significant surplus despite the latest production cuts by OPEC and its partners.

The International Energy Agency (IEA) has cut its 2020 growth forecast, saying that global energy demand is going to fall to the lowest level since 2011, having been hit hard by the coronavirus outbreak.



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