ON YOUR SIDE: Virus outbreak blamed for forecast fall in oil demand

Oil Price Fundamental Daily Forecast – Speculators Betting Worst of Fuel Demand Crisis May Be Over

Oil Price Fundamental Daily Forecast – Speculators Betting Worst of Fuel Demand Crisis May Be Over

The International Energy Agency expects oil demand in the first quarter to fall for the first time in 10 years before picking up in the second quarter.

The new estimates show that oil markets face a significant surplus despite the latest production cuts by OPEC and its partners. "Lower-than-expected consumption in the OECD trimmed 2019 growth to 885 kb/d", the report said.

The agency also slashed its projection for growth in oil demand this year by 365,000 barrels a day to 825,000 barrels a day - the smallest number since 2011.

"Our baseline thesis remains that oil demand destruction remains largely a China story and has yet to spill over to impact global demand", said Helima Croft, head of commodity strategy at Citadel Magnus.

On Tuesday, the Organization of the Petroleum Exporting Countries (OPEC) slashed its forecast for global oil demand by 230,000 barrels per day.

The outbreak has shuttered businesses and prompted the quarantine of tens of millions of people in China, the world's biggest crude importer.

US crude futures have fallen 17% this year as traders assessed the impact of the epidemic.

The IEA said that in addition travel to and from China has increased, raising the chance that the disease will spread.

OPEC and its allies, a group known as OPEC+, could agree to further output cuts when they next meet, possibly as early as this month. That would mark the first quarterly decline since the financial crisis in 2009.

U.S. Energy Secretary Dan Brouillette told Reuters the coronavirus epidemic in China had had a marginal impact on energy markets and was unlikely to dramatically affect oil prices even if Chinese demand fell by 500,000 barrels per day.

Given the abundance of supply, disruptions in OPEC members such as Libya and Nigeria are having little impact on prices, the agency said.

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