Oil markets are set to remain “even more fragile” for the rest of the year as Covid-19 infections increase globally, the International Energy Agency said in its latest monthly market report.
“The uncertainty created by Covid-19 shows little sign of abating,” the IEA said. “In various places, the situation is worrying and we are seeing localised lockdowns. These developments weigh heavily on economic activity and lead to lower expectations for a recovery in energy demand.”
Demand during seven months between January and July averaged 10.5m bpd below the levels seen last year. The initial pick-up in demand from the easing of lockdowns has flattened as Covid-19 infections surge in many places.
The Paris-based agency expects demand to fall even further by 8.4 million barrels per day in 2020, compared to its earlier estimate of 8.1m bpd. The revised projections are a result of “continued teleworking and weak aviation sector”.
The IEA also slashed its demand estimates for the third and fourth quarters of 2020 by 100,000 bpd and 600,000 bpd, respectively.
Meanwhwile, OPEC on Monday cut its oil demand projection by a further 400,000 bpd for this year, despite a pick-up in consumption from OECD countries.
Oil demand is expected to decline by 9.5m bpd, resulting in overall demand of 90.2m bpd this year, according to the exporters’ group.