For the first time in a decade, global oil demand is set to contract in 2020 due to a fall in economic activity amid the spread coronavirus, said the International Energy Agency on Monday.
The downward revision comes in the backdrop of a massive drop of 30 percent in oil prices, the biggest one day fall recorded since the 1991 Gulf War, after Saudi Arabia launched a bid for market share following the collapse of an output pact with Russia.
The energy watchdog said it expected oil demand to be 99.9 million barrels per day (bpd) in 2020, almost 1 million bpd lower than its previous forecast and signalling a contraction of 90,000 bpd, the first fall in demand since 2009.
Global oil demand has fallen 2.5 million bpd or around 2.5 percent in the first quarter as per IEA estimates, on account of a decline in travel and economic activity due to coronavirus. Of the total, 1.8 million bpd fall is estimated in China.
The Paris-based IEA said in its medium-term outlook report that in an extreme scenario where governments fail to contain the spread of the coronavirus, which has already infected over 110,000 people, consumption could drop by up to 730,000 bpd.
The virus has led to a sharp drop in industrial activity particularly in China and other Asian economies, as well as Italy, one of the worst-affected places outside China. The virus has led to a slowdown in demand for ground and air transport.
IEA's report further said that while the demand is expected to recover in 2021, the growth was set to decelerate and rise only by 800,000 bpd by 2025 due to government policies that will push energy alternatives that cut greenhouse gas emissions.