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- The International Energy Agency lowered its global forecasts for oil demand for 2020 and 2021 over expectations of a further decline in air travel.
- Although there has been a recovery in business and industrial activity, the agency has not shyed away from its estimate.
- The Paris-based agency expects global oil demand to fall by 8.1 million barrels a day this year to 91.1 million barrels a day, driven by lower demand for jet fuel.
- For 2021, the agency revised its previous estimate by 240,000 barrels per day to 97.1 million barrels per day, which again reflects weakness in the aviation sector.
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The International Energy Agency cut its forecast for global oil demand for Thursday for the first time in months on Thursday, citing the dramatic decline in demand for jet fuel as the COVID-19 pandemic continues to affect air travel.
In its closely watched monthly report, the Paris-based agency warned that reduced air travel would reduce the 2020 oil demand by an annual 8.1 million tons per day to 91.1 million tons per day, marking a decline of 140,000 tons per day from its previous forecast a month ago.
By 2021, the agency cut its estimate of global demand by 240,000 barrels per day to 97.1 million barrels per day.
“Demand for jet fuel remains the main source of weakness,” the IEA said in its August report.
The IEA, which advises Western governments on energy policy, noted that there was a recovery in business and industrial activity, as well as e-commerce, which was reflected in a strong pick-up in trucking activity.
But that has not prevented the IEA from downgrading its oil forecast for both this year and next.
“With few signs that the picture will significantly improve in the near future, we have downgraded our estimate for global demand for jet fuel and kerosene,” the IEA said, reducing its consumption forecasts by 39% to 4.8 million barrels per day. By 2021, the IEA expects an increase of just 1 million barrels per day in the demand for jet fuel.
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The IEA said new infections are disrupting mobility, pointing to the reduction in lockdown restrictions that have triggered the resurgence of COVID-19 cases worldwide.
Mobility data show that recovery has plateaued in many regions but is still on the rise in Europe, the report said. As a result, demand for fuels for road transport was stronger in the first half of the year. However, the IEA warned that the outlook for the second half is much less clear.
The IEA said the demand for oil in June was more supply – usually a Bullish factor – but uncertainty related to COVID-19 and the possibility of increased output by top producers meant that the rebalancing of the market would be “delicate”.
OPEC also cut its outlook on global oil demand in its Monday market report published on Wednesday. The producer group, which accounts for about a third of the world’s total oil production, expects demand growth to fall by 9.1 million barrels per day this year, marking a decline of 100,000 barrels per day of his latest prognosis.
Oil production rose in the US, Canada and Brazil, while the OPEC + countries, which had agreed to jointly curb production for several months this year, imposed self-imposed restrictions, the IEA said.
“If countries that have so far failed to meet their quotas by cutting back enough to bring them into compliance, global oil supply would not necessarily increase significantly.”
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