It will take more than a year, and perhaps several years, for oil demand to recover to what it was before the coronavirus pandemic, said Fatih Birol, executive director of the International Energy Agency ahead of Thursday’s update on energy markets. Crude demand of about 100 million barrels a day prior to the pandemic plunged by about 30% last month. The Paris-based agency had forecast that demand would fall by about 9 million barrels a day on average this year.
Oil prices, which had plunged to $30 a barrel for Brent crude and to below $20 a barrel for U.S. West Texas Intermediate have recovered somewhat over the past two weeks as OPEC+ countries began cutting output. But today OPEC reported that those cuts aren’t enough. OPEC cut its estimates for how much oil it will need to supply for the next three months by almost 3 million barrels a day, or about 15%. The new projections come after three of OPEC’s key Persian Gulf exporters–Saudi Arabia, the United Arab Emirates and Kuwait–said that next month they will make further supply cuts. Saudi Arabia will take a further 1 million barrels a day out of production in June. That will bring Saudi output to its lowest level since 2002.
Meanwhile back in Paris, the IEA said that oil prices could climb in the second half of 2020. If prices recover to more than $40 a barrel, production from U.S. shale oil fields may increase, said the IEA’s Birol.
And back in the United States, the Energy Information Administration reported that U.S. crude inventories fell in the most recent week by 745,000 barrels. That was the first weekly decline since January.
U.S. benchmark West Texas crude fell by 1.36% today to $25.43 a barrel. International benchmark Brent crude dropped 2.43% to $29.25 a barrel.