Sep 15, 2020 - Energy & Environment

Oil faces "treacherous" path as COVID-19 digs in

A barrel of oil wearing a mask.
Illustration: Sarah Grillo/Axios

The International Energy Agency this morning cut its estimate for the pace of global oil demand recovery from the depths of the pandemic-fueled collapse, and warned that "uncertainty created by COVID-19 shows little sign of abating."

Driving the news: The agency now projects that full-year 2020 global demand will be 8.4 million barrels per day less than in 2019, compared to 8.1 mbd in last month's estimate.

  • In its monthly market analysis, the agency has cut its demand growth estimate by 400,000 barrels per day for the second half of the year.

Why it matters: The latest revision shows how the pandemic will continue to weigh on oil prices, which are higher than their April nadir, but have also been largely stuck in place for months and lost ground over the past week.

What they're saying: "As national lockdowns eased there was an initial sharp recovery in demand led by gasoline, but the curve has flattened out and it is becoming increasingly apparent that COVID-19 will stay with us for some time," the agency said.

The bottom line: "Global oil demand has accelerated rapidly since its low point in April. However, the path ahead is treacherous amid surging COVID-19 cases in many parts of the world," IEA said.

Threat level: In July and August combined, 13 more North American oil-and-gas producers and 19 more oilfield services companies filed for bankruptcy protection, per the latest tally from the law firm Haynes and Boone.

  • "Without any near term horizon hope for improving economic conditions for U.S. producers, it is reasonable to expect that a substantial number of producers will continue to seek protection from creditors in bankruptcy before this year is over," the firm said.
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