The OPEC oil cartel said Thursday that the world market for crude is undergoing an unprecedented jolt due to coronavirus mitigation measures that have decimated demand.
“The oil market is currently undergoing a historic shock that is abrupt, extreme and at global scale,” said the group of producer nations in its latest monthly report.
The cartel now forecasts a “historical drop” of around 6.8 million barrels per day (mbd) in average daily demand for 2020. It sees the worst contraction of about 20 mbd in April.
Those forecasts are less severe than those released on Wednesday by the International Energy Agency, a Paris-based organisation that advises major energy-consuming nations.
It forecast the drop in demand in April to be around 29 mbd, and 9.3 mbd overall in 2020.
OPEC and its allies struck a deal at the weekend to scale back output by around 10 mbd, but oil prices have not rallied as traders see it as insufficient given the magnitude of the drop in demand.
OPEC also revised down its forecasts for non-cartel supplies. It now sees these as falling by 1.5 mbd for the year as a whole.
The cartel had previously expected the United States to have been responsible for most non-cartel production growth, but now forecasts US output to drop by 0.15 mbd.
The rise of US oil production thanks to the tapping of shale deposits has disrupted the global markets in recent years as ample supplies have weighed on prices, forcing OPEC and its allies to restrain production.
The rapid drop in oil demand thanks to the lockdowns introduced to stem the spread of coronavirus saw crude prices tumble by two-thirds from their levels at the beginning of the year has also hit investment.
“These restrictions have led to tumbling fuel consumption, amid product inventory builds, severely damaging jet fuel markets and driving gasoline margins into negative territory,” said the cartel.
OPEC said capital expenditure — money spent by oil firms to maintain and expand production — fell to its lowest level in 13 years.
“The impact of COVID-19, ensuing global economic recession and oil demand shock, will also lead to supply disruptions,” OPEC warned.