According to the International Energy Agency (IEA), global oil demand is now expected to contract for the first time in a decade in a quarter due to a new coronavirus and a widespread economic shutdown in China.
Demand in the first quarter of 2020 is expected to decline by 435,000 barrels a day from a year ago, mark the first quarterly decline in more than a decade, according to the IEA's monthly oil market report released Thursday.
The expected decline in demand prompted the agency to cut its 2020 growth forecast by 365,000 bpd to 825,000 bpd, the lowest since 2011. Consumption in Organization for Economic Cooperation and Development countries fell to 885,000 bpd in 2019.
The coronavirus outbreak also affected businesses in other countries, as economic forums and business conferences were cancelled. The last one was. Mobile World Congresswhich was supposed to take place this month in Barcelona.
The negative impact on demand for oil had a strong impact on the price of "black gold". Due to the coronavirus, the price of a barrel of Brent oil fell by about $10, dropping below $55 per barrel.
But prices also rose this week because major producers from the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers, led by Russia, may cut global oil production even further to counteract falling demand between the United States and China.
On Thursday, benchmark Brent crude was priced at $55.73 a barrel, while U.S. West Texas Intermediate (WTI) was $51.21 a barrel.
Last week, the technical committee of OPEC's 14-member producer group, led by Saudi Arabia and its non-member allies led by Russia (an alliance known as OPEC+), recommended a 600,000 bpd production cut in addition to its current reduction of 1.7 million bpd. Crucially, however, Russia has not yet indicated whether it would support a deeper cut.
In its monthly oil market review Wednesday, OPEC also sharply lowered its forecast for oil demand growth this year, citing the coronavirus outbreak as a "major factor" in its decision. It revised its forecast for global oil demand growth downward to 0.99 million bpd in 2020, down 0.23 million bpd from the previous month's estimate.