Warmer weather, slowing economy also cited
The U.S. Energy Information Administration (EIA) is revising its forecast for global liquid fuels demand downward in part because of the economic effects of the coronavirus (COVID-19) outbreak.
The EIA now believes demand will average 101.7 million barrels per day (b/d) in 2020, 1.0 million b/d more than the 2019 average but 378 000 b/d less than was forecast in January 2020. The change in the forecast is also driven by a combination of lower-than-expected heating fuel consumption caused by the Northern Hemisphere’s warmer-than-expected winter and an expected slowing of economic growth in general as well as the COVID-19 outbreak.
EIA estimates that COVID-19 will reduce China’s total petroleum and liquid fuels demand by an average of 190 000 b/d in 2020. This forecast is based on estimates of three components:
- The reduction in demand for petroleum and liquid fuels caused by the general decline in Chinese economic activity as measured by gross domestic product (GDP)
- The volume of foregone jet fuel consumption in China caused by flight cancellations
- The additional impact on China’s demand for other transportation fuels
As with any forecast, EIA said its estimates contain a number of uncertainties and limitations.
“Notably, this forecast is particularly sensitive to the duration of the demand disruption caused by COVID-19. EIA assumes that the timing of COVID-19’s impact on petroleum demand will follow a similar path as the 2003 SARS coronavirus outbreak: demand reductions will intensify in February, peak in March, and steadily decline during April, May, and June,” the EIA said in a news release.
GDP-induced impacts will linger through December.
The EIA noted that the 2003 SARS coronavirus and COVID-19 have different rates of transmission, detection, and mortality. Consequently, EIA considered the example of the 2003 SARS coronavirus outbreak when estimating duration and peak of the demand impacts, but it did not consider it when estimating the levels of petroleum demand reductions.
Based on estimates from Oxford Economics, economic growth in China will rebound once COVID-19’s impact has faded, and EIA expects petroleum demand to approach the levels forecast in the January STEO near the end of the year.