MON, MARCH 09 2020-theG&BJournal- The International Energy Agency (IEA) has cut its forecast for global oil demand down by 90,000 b/pd, citing the spread of coronavirus beyond China.
‘’We assume that oil demand returns to close to normal in 2H20,’’ IAE said in their March 2020 oil market report.
Global refining throughput in 2020 is expected to decline for the second consecutive year, falling below 2017 levels as demand for transport fuels plunges in the wake of the coronavirus, IAE said. ‘’ While the situation remains fluid, we expect global oil demand to fall in 2020 – the first full-year decline in more than a decade – because of the deep contraction in China, which accounted for more than 80% of global oil demand growth in 2019, and major disruptions to travel and trade.’’
IAE noted that the impact on the world economy is becoming more apparent, and growth estimates for this year are being downgraded. Earlier this month, the OECD lowered its global economic growth estimate for 2020 by 0.5 % to 2.4%, a revision that is factored in to our latest projections.
‘’The immediate outlook for the oil market will ultimately depend on how quickly governments move to contain the coronavirus outbreak, how successful their efforts are, and what lingering impact the global health crisis has on economic activity. At this stage, high uncertainty over the course of the outbreak has led us to propose alternatives to our base case – a more pessimistic one in which global measures are less successful in containing the virus; and an optimistic case in which the virus is contained quickly.’’
Amidst the collapsing global oil demand, OPEC+ producers met on 6 March to review the market situation and overnight, Saudi Arabia, the largest crude oil exporter, dramatically announced production increase and price decrease despite reeling demand from coronavirus.
The turmoil in the market is stirring concern among Nigeria’s government budget officials who priced benchmark for 2020 budget on $57 per barrel as well as economy watchers who say they still await government response to the economic impact of the global health crisis.
The Lagos Chamber of Commerce and Industry Sunday provided insights into the possible devastating impact of the crisis on Nigeria’s foreign reserves and government’s revenue.
‘’This outlook has the potential to weakening of investors’, generate speculative pressures on the currency, force likely depreciation of the naira exchange rate, heighten inflationary pressures on the back of currency weakening, increase production and operating costs for businesses and weakens purchasing power with adverse implications for the welfare of the citizens,’’ the LCCI noted.