Mar 4, 2020 - Energy & Environment

Fueled by coronavirus, global oil demand set to drop record amount

Illustration: Sarah Grillo/Axios

Global oil demand in the first quarter of 2020 is expected to decline by the largest amount in recorded history, IHS Markit projected Tuesday night.

Driving the news: The decline, which is set to exceed even what occurred in the 2009 financial crisis, is being driven by the spread of the novel coronavirus and subsequent stunted economic activity in China.

The big picture: The paramount concern of the coronavirus is not oil demand, of course, but its impact on humanity's health. Nearly 3,300 people around the world have died from the virus as of Tuesday, and over 92,000 people have been infected.

By the numbers: IHS Markit, a global consultancy, estimates that global oil demand will be 3.8 million barrels a day lower than a year earlier.

  • This is 4.5 million barrels a day lower than previous estimates before the spread of the coronavirus.
  • The previous biggest decline was in 2009 in the wake of the economic crash. Demand fell by 3.6 million barrels a day in the first quarter of that year.
  • For context, the world today consumes a little less than a 100 million barrels a day.

One level deeper: Production from OPEC, the mostly Middle Eastern bloc of oil-producing nations, could continue to fall beneath its current 17-year low as buyers cut oil purchases through March and April, the report states.

  • Gasoline and jet fuel in the country is especially affected by the coronavirus as the government restricts road travel and flights to and from China are suspended.

What they're saying: “This is a sudden, instant demand shock—and the scale of the decline is unprecedented,” said Jim Burkhard, vice president and head of oil markets, IHS Markit.

Between the lines, via Axios' Amy Harder: The thing that’s kicking the oil industry when it's down — the coronavirus and fears about it spreading — is also what canceled CERAWeek, its big annual confab, originally set for Houston next week.

Go deeper:

Go deeper

Trump to buy oil for nation’s strategic reserves

President Trump. Photo: The Washington Post / Contributor

President Trump will direct the Energy Department to buy oil for the nation’s strategic stockpile to boost prices and help the oil industry reeling after the market’s historic collapse this week.

The big picture: America’s Strategic Petroleum Reserve was created in the 1970s to ensure the U.S. has oil in case of an emergency. Today, Trump is buying oil for the reserve because of an emergency.

The fallout from oil's collapse

Data: Yahoo Finance; Chart: Axios Visuals

ExxonMobil, citing an "unprecedented environment," said last night that it plans to "significantly" cut spending in light of the coronavirus and the collapse in oil prices.

Why it matters: The oil giant's announcement is the latest sign of how deeply the upended market is affecting the sector.

Oil demand could plummet 20% due to coronavirus fallout

Illustration: Sarah Grillo/Axios

Analysts and oil industry officials are racing to keep up with how much oil consumption is falling as more countries and regions impose restrictions.

What's new: This morning Russell Hardy, CEO of oil trading giant Vitol, said he sees demand loss peaking at 15 million–20 million barrels day over the next few weeks. That's in the context of a roughly 100 million barrel per day market.