Skip to main content

The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Tex., on Nov. 24, 2019.Angus Mordant/Reuters

The International Energy Agency cut its 2020 oil demand forecast on Thursday, warning that reduced air travel because of the coronavirus pandemic would lower global oil demand this year by 8.1 million barrels a day.

The Paris-based IEA slashed its 2020 outlook by 140,000 b/d to 91.9 million b/d, its first downgrade in several months.

“Jet fuel demand remains the major source of weakness,” the IEA said in its monthly report.

“In April the number of aviation kilometres travelled was nearly 80 per cent down on last year and in July the deficit was still 67 per cent. ... The aviation and road transport sectors, both essential components of oil consumption, are continuing to struggle.”

Damage to demand wrought by less cross-border travel was mitigated somewhat by recovery in industry and e-commerce that was supporting trucking, but the IEA still predicted 2021 oil consumption would be slightly lower than in 2019.

Data cited by the IEA indicated that mobility in many regions had reached a plateau but was increasing in Europe, although a rise in COVID-19 cases caused the agency to cut demand estimates for gasoline.

The agency said that while supply exceeded demand in June, uncertainty over future demand along with increased output by top producers means rebalancing oil markets will be “delicate.”

Oil production was recovering in the United States, Canada and Brazil at the same time producers from the Organization of the Petroleum Exporting Countries and allies such as Russia, a group dubbed OPEC+, were easing their output cuts, the IEA said.

“However, if countries that have not hitherto complied with their quotas cut back by enough to bring them into compliance, global oil supply would not necessarily increase significantly,” the IEA added, citing the United Arab Emirates and Iraq.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.