US EIA slashes 2020 oil demand outlook by 3 million b/d to 8.2 million b/d contraction

Washington — Global oil demand is set to contract by 8.15 million b/d in 2020 because of the coronavirus pandemic, the US Energy Information Administration said Tuesday, slashing its monthly projection by nearly 3 million b/d.

EIA still expects second-quarter global oil demand to take the biggest hit, shrinking by a staggering 18.81 million b/d from Q2 2019 to 81.44 million b/d. It said the demand impact would gradually dissipate over the next 18 months as travel restrictions ease and economic activity returns.

The Short-Term Energy Outlook projects global oil demand to average 92.59 million b/d in 2020 and rise to 99.53 million b/d in 2021.

"We expect consumption to increase in 2021 but remain below the [Q4] 2019 average," EIA Administrator Linda Capuano said in a statement. "The possibility of lasting behavioral changes to transportation and oil consumption patterns present considerable uncertainty to the increase in liquid fuels consumption, even with a significant increase in GDP."

FALLING US OIL OUTPUT

EIA now estimates US oil production will fall to 11.69 million b/d in 2020, the first annual decline since 2016, and fall further to 10.9 million b/d in 2021.

"Typically, price changes affect production after about a six-month lag," EIA said in the report. "However, current market conditions will likely reduce this lag as many producers have already announced plans to reduce capital spending and drilling levels."

The US pumped a record 12.23 million b/d in 2019.

EIA raised its outlook for crude oil prices slightly after OPEC+ producers pledged two rounds of significant supply cuts in recent weeks.

Front-month Brent prices are expected to average $34.13/b in 2020 and $47.81/b in 2021, EIA said. It expects WTI prices to average $30.10/b in 2020 and $43.31/b in 2021.

EIA expects OPEC production will average 26.57 million b/d in 2020 and 28.44 million b/d in 2021, down from 29.27 million b/d in 2019.