Global Oil Demand Will Experience Historic Decline This April

After Saudi Arabia and Russia Ended Oil Price War and OPEC to Cut Global Production by 9.7 Million Barrels Per Day, the International Energy Agency (IEA) projected on Wednesday a fall of 29 million barrels per day in oil demand this April, to levels not seen in 25 years, warning that production cuts will not fully offset the market decline in the short term.

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The future of Brent oil, the international benchmark, fell about 4% shortly after the IEA monthly report, trading around $28.30 per barrel.

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The IEA estimated a drop of 9.3 million bpd in demand in 2020, even though it qualified the agreement among producers for record supply cuts as “a solid start” in response to the coronavirus pandemic.

“By reducing the peak of oversupply and flattening the growth curve of inventories, they help a complex system absorb the worst of the crisis,” the Paris-based agency said in its monthly report.

“There is no viable agreement that can cut supply enough to offset such demand losses in the short term. However, last week’s agreement is a solid start.”

Known as “Black April”, this month could turn out to be the worst month in history for the oil industry, as production is set to rise while demand takes a tumble due to isolation measures adopted worldwide against the coronavirus, said IEA Executive Director Fatih Birol.

Oil producers “lost two very important months,” he added, referring to the failure of the OPEC and allies to reach an agreement in March to restrict supply.

Now, in addition to production cuts, some countries are expected to increase purchases for their strategic reserves, as is the case with China, the world’s largest importer taking advantage of the drop in oil prices to buy cheaper barrels and secure its stocks.