Home 2020 Crude Oil Demand Heads for Record Lows

Crude Oil Demand Heads for Record Lows



“This is a sudden, instant demand shock, the scale of the decline is unprecedented.”

Gasoline becomes more affordable, just when Americans do not need it.”

Global Crude Oil consumption is heading to the biggest annual contraction in history, as more countries introduce unprecedented measures to fight the virus outbreak.

Travel bans, work-from-home, canceled vacations and disrupted supply chains all mean reduced demand for fuel.

As societies respond to the virus, Crude Oil demand is falling further. Oil traders, executives, hedge fund managers and consultants are revising their forecasts dramatically to the Southside.

The growing fear among many traders is that oil demand, which averaged just over 100-M BPD in Y 2019 may contract by the most ever this year, surpassing the 2.65-M BPD marked in Y 1980, when the world economy crashed after the 2nd Crude Oil crisis.

Crude Oil prices have fallen by almost 50% this year as the virus’s worsening impact on the global economy coincides with a massive supply shock.

Saudi Arabia and Russia are in an all-out price war to pump more Oil.

Goldman Sachs, which runs one of the largest commodity trading business in Wall Street, is now forecasting that Crude Oil demand will contract by more than 4-M BPD every month from February to April.

The accelerating decline in Crude Oil demand offers a look into the worsening state of the world economy as governments in Europe and the US impose restraints on social behavior that stop people spending money and moving around.

At the height of the coronavirus outbreak in China in November, the country’s Crude Oil demand fell at least 20%, or about 3-M BPD.

The US, Germany, France, Italy, Spain, the UK and Canada consume 31-M BPD, implying that a similar percentage drop in consumption to the 1 that China suffered would cut demand by about 6-M BPD.

Trafigura, among the world’s Top 3 independent Crude Oil traders, is the most Bearish about demand, saying that consumption could soon be contracting by close to 10-M BPD, or 10% of global demand, with perhaps more to come.

Trafigura’s forecast is for a relatively short frame, not a Quarterly or an annual forecast. But it shows the sudden drop in consumption.

Crude Oil consultants have marked down their demand forecast significantly over the last few days.

IHS Markit believes consumption will drop by 1.42-M BPD on average this year.

FGE is forecasting a 1.3-M BPD drop on average for the year.

The International Energy Agency (IEA) said on 9 March that Y 2020 Crude Oil demand would contract by about 90-K BPD.

The world is awash in Crude Oil.

Stay tuned…

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S. Jack Heffernan Ph.D. Economist at Knightsbridge holds a Ph.D. in Economics and brings with him over 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over $500m and 1 that reach a peak market cap of $15b. He has managed and overseen start ups in Crypto, Mining, Shipping, Technology and Financial Services.