COVID-19: World oil demand to plunge more than 10%, says Vitol

There are fears that global oil demand will soon plunge by more than 10 percent from the typical 100 million barrels per day, bpd consumption, as the raging coronavirus pandemic otherwise known as covid-19 forces countries into lockdown, according to the world’s biggest independent oil trader, Vitol.

Demand destruction this year depends on how many countries follow an Italian-style lockdown. The drop in Italian consumption has been dramatic. If you extrapolate it to the rest of Europe, and particularly the U.S., then you can get as bearish as you like,” Giovanni Serio, Head of Research at Vitol, said. According to the executive at the largest oil trader in the world, a 10-percent drop in the United States demand would mean a 2 million bpd loss in consumption.

Currently, an Italy-style lockdown in the United States is not Vitol’s base case, but if COVID-19 infections spiral out of control, there could be drastic measures coming that would destroy a lot of oil demand.

California, for example, is already under lockdown, after ordering on Thursday its 40 million residents to stay at home unless they have an essential reason to go out. In Europe, lockdowns in Italy, Spain, and France are crushing oil demand, as German traffic is down 40 percent, and if the United Kingdom takes more measures to curb domestic travel, around 40 percent of Europe’s 7-million barrel per day, bpd demand is at risk, Vitol’s Serio said. On a positive demand note, activity in China is resuming and Beijing is a major beneficiary of the crumbling oil prices, according to Serio. While China recovers from a demand slump, the worst for the rest of the world has yet to come, and analysts are already expecting zero or negative demand growth this year. It’s not certain that a Chinese buying spree of cheap crude oil could sustain the heavily depressed market for long either, because the world is running out of storage, which could send oil prices crashing into the teens and even to $10 a barrel. Meanwhile, analysts say that the month of April could see the largest supply overhang in the history of the oil market. “We now expect the year-on-year, y/y demand loss to peak in April at 10.4 million barrels per day (mb/d), and annual demand to fall by a record 3.39mb/d in 2020,” Standard Chartered wrote in a note. In the short run, the oil market surplus could reach a peak of 13.7 mb/d in April, Standard Chartered said, with an average surplus of 12.9 mb/d for the second quarter. The inventory build-up could reach a gargantuan 2.1 billion barrels by the end of the year, “stretching the midstream of the industry to its limits,” the bank wrote. That figure represents an upward revision of 50 percent from the 1.4-billion-barrel inventory surplus the bank predicted just a week ago.

Check Also

Buhari Seeks Senate’s Approval For Issuance Of N402bn Promissory Notes, Confirmation Of Lamido

President Muhammadu Buhari has written separate letters to the Senate, seeking for the approval for …

122 culprits in custody for oil theft – NNPC

The Group Chief Executive Officer of the Nigeria National Petroleum Company, Mele Kyari, on Tuesday, …

NASS to encourage private enterprises through enabling laws – Omo-Agege

The Deputy Senate President, Ovie Omo-Agege, yesterday disclosed that the National Assembly, NASS, is committed …

Leave a Reply

Your email address will not be published.