In the United States there is always talk about oil prices, which makes sense as so much of the US economy is dependent on fossil fuels. However, the global economy is very similar, requiring a lot oil to function effectively. Typically, then, global oil demand is very high; but this week, global oil demand for the first quarter of the year is expected to register great declines: by 435,000 barrels per day compared to the same period last year.
The International Energy Agency said this is the first such quarterly decline in more than a decade.
Also, the agency marked down its forecast for global oil demand growth for all of 2020. The IEA now expects that demand will only increase by 825,000 barrels per day, which is the weakest annual pace in nearly a decade.
Accordingly, the Paris-based agency said, on Thursday, the oil market is expected to move towards equilibrium towards the second half of the year, thanks to coordinated production cuts across OPEC, with OPEC allies removing excess supply. Of course, the escalating concerns about coronavirus spread has halted overall demand, and that has forced the oil cartel to consider yet more reductions in output to thwart the potential supply glut.
In its monthly oil report, the IEA said the coronavirus’ impact has been difficult to measure at its present stage. In a statement, the agency said, “The onset of [the coronavirus] will likely have a large impact on both the both the world economy and oil demand. Consequences will vary over time with the initial economic hit on transportation and services, likely followed by Chinese industry, then eventually exports and the broader economy.”
All in all, Brent crude futures have slipped more than $16 from their recent high, which was posted on January 8. That is a drop of approximately 23 percent and it definitely reflects the concern that the coronavirus outbreak in China will continue to take its toll on the global economy.
China, of course, is an essential component to the global economy, particularly after 2003. At that point, the country skyrocketed to a global recognition as a major player in tech and manufacturing, cranking out popular consumer electronics like the iPhone while simultaneously driving demand for its commodities, like copper and oil. As a whole, too, the country spends more on luxury items, helping China grow from 4 percent of the world GDP, in 2003, to 16 percent output now.