Oil falls to $19 per barrel after agency projects coronavirus will cause record slump in global demand
- Oil prices slumped Wednesday after the International Energy Agency projected that global demand will fall by a record amount in 2020 amid the coronavirus pandemic.
- US West Texas Intermediate crude fell nearly 3% to $19.20 per barrel Wednesday. Brent crude, the international benchmark, declined about 4% to $27.96 per barrel the same day.
- Global oil demand is expected to drop by 9.3 million barrels per day, according to a Wednesday IEA report. For April, global oil demand is expected to decline by 29 million barrels per day from a year ago, to levels last seen in 1995.
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Oil prices slumped Wednesday after the International Energy Agency projected that global demand will fall by a record amount in 2020 amid the coronavirus pandemic.
Global oil demand is expected to drop by 9.3 million barrels per day for the year, according to a Wednesday IEA report. In April, global oil demand is expected to decline by 29 million barrels per day from a year ago, to levels last seen in 1995.
"The impact of containment measures in 187 countries and territories has been to bring mobility almost to a halt," the IEA wrote in the report.
US West Texas Intermediate crude fell nearly 3% to $19.20 per barrel Wednesday. Brent crude, the international benchmark, declined about 4% to $27.96 per barrel the same day.
Global demand for oil has been cratered by the coronavirus pandemic, as strict social distancing guidelines to curb the spread of COVID-19 have caused airlines to cut flights and consumers to stay home. Oil prices have failed to rebound even after OPEC agreed to historic production cuts over the weekend, looking to support the commodity amid falling demand.
The IEA expects that more cuts to supply will come against the weak backdrop for oil. For May, the group projected that global oil supply will fall by a record 12 million barrels per day after OPEC's agreed 9.7 million barrel-per-day cut.
"In light of the unprecedented depth of the crisis, the IEA has urged major consumers and producers to work together through the forum of the G20 to mitigate the impact on market stability, and an extraordinary meeting of energy ministers from G20 and other countries took place" in April, the group wrote.
Still, the measures announced by OPEC won't balance the market immediately, the IEA said. But, "by lowering the peak of the supply overhang and flattening the curve of the build-up in stocks, they help a complex system absorb the worst of this crisis, whose consequences for the oil market remain very uncertain in the short term," the group wrote.
The IEA expects that a gradual recovery will begin in June, but that demand will still be 15 million barrels per day lower on the year.
"There is no feasible agreement that could cut supply by enough to offset such near-term demand losses," the IEA said. "However, the past week's achievements are a solid start and have the potential to start to reverse the build-up in stocks as we move into the second half of the year."
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