The oil industry will shrink for the first time in over 10 years as a result of coronavirus, a report by the International Energy Agency (IEA) predicts.
Demand in Q1 2020 is expected to fall by 435,000 barrels per day compared with Q1 2019. The agency has also revised growth estimates for the year downwards by 365,000 barrels per day, predicting 825,000 barrels per day of growth, the least growth since 2011.
The monthly report looks at the impact of the Covid-19 coronavirus outbreak on the oil industry. In recent weeks, the price of crude oil has steadily decreased.
Analysts put the price drop down to China’s loss of productivity because of the virus. China claimed more than three-quarters of global oil demand growth last year; it refines the second-greatest volume of crude oil every year.
Employees have stayed off work for weeks to limit infection. Since January, crude oil processing in China has dropped by 1,100,000 barrels per day.
Many cities began returning to work last week, so productivity is expected to recover.
Blockades and downturns
However, a blockade on Libyan ports by internal factions has also caused oil supply to slow. Output in the United Arab Emirates decreased slightly in January and February.
On top of this, demand for bunker fuel felt the effect of new regulations by the International Maritime Organisation. From 1 January, tankers face increased tariffs for burning the polluting fuel.
The report also said production among the Organisation of Petroleum Exporting Countries (OPEC) had fallen to 27 million barrels per day. This was offset by other countries increasing their production by 2.1 million barrels per day.
The report summary concludes optimistically, saying: “We hope that by that time, the Covid-19 crisis will have abated.”
Today, estimates in an article by scientific journal Nature put the earliest peak of the virus as the end of February, though it could fall as late as between March and late May.