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After Saudi Arabia and Russia end oil price war and OPEC cut global production by 9,7 million barrels a day, the International Energy Agency (IEA) on Wednesday projected a drop of 29 million barrels per day in demand for oil this April, to levels not seen for 25 years, warning that production cuts will not be able to fully compensate for the short-term market decline.
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Brent crude futures, the international benchmark, fell about 4% shortly after the IEA's monthly report, trading close to $28,30 a barrel.
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The IEA estimated a drop of 9,3 million bpd in demand in 2020, despite having qualified as “a solid start” the agreement between producers for record restrictions on the supply of oil, in response to the pandemic of the coronavirus.
“By reducing the peak of oversupply and flattening the curve of inventory growth, they help a complex system absorb the worst of the crisis,” the Paris-based agency said in its monthly report.
“There is no viable deal that could cut supply enough to offset such short-term demand losses. However, last week's deal is off to a solid start."
Becoming known as “black April”, this month could prove to be the worst month in history for the oil industry, as production is expected to grow while demand plummets due to isolation measures adopted by the world 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 in reaching a deal in March to restrict supply.
Now, in addition to the production cuts, some countries should increase purchases for their strategic reserves, which is the case of China, the world's largest importer takes advantage of the oil slump to buy cheaper barrels and secure its stocks.
