IEA likely to revise down oil demand projection

The IEA is likely to revise its oil demand growth outlook in line with projections by IMF and other forecasts reflecting the expected economic downturn from the coronavirus outbreak globally, executive director Fatih Birol said today.

The spread of coronavirus in China and other countries in Asia and Europe is expected to negatively affect economic growth but "its impact on oil markets is disproportionately strong" because of the transportation sector, Birol told the US Senate Energy and Natural Resources committee.

"The economy is affected but the biggest hit is on the aviation sector, both domestic and international," Birol said. "Aviation makes less than 1pc of GDP but close to 10pc of global oil consumption."

The organization representing major oil consuming countries will release its monthly oil report and the medium term forecast on 9 March.

The IEA last month cut its 2020 demand forecast by 365,000 b/d to 825,000 b/d — the lowest since 2011. That forecast was based on an assumption that economic activity will return to normal in the second quarter.

"China was responsible last year for 80pc of global oil demand growth and it is now the epicenter" of the outbreak, Birol said today.

But he added that "it is a temporary issue — the fundamentals of oil demand are strong."

The IMF yesterday said it is likely to revise lower its growth projections for China's GDP — and global growth — to account for the coronavirus outbreak.

Opec member countries today agreed to recommend that the Opec+ group should deepen oil production cuts by a combined 1.5mn b/d in the second quarter this year, conditional on Russia's support.

Birol was pressed to lay out possible economic and energy demand consequences from the outbreak — part of an increasing focus in Congress as the number of cases continues to rise in the US.

"Any specific short-term forecasts I give you today could be out of date by tomorrow," Birol said.

By Haik Gugarats