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EIA lowers global oil demand due to impacts of coronavirus on China

The US Energy Information Administration forecast global oil market demand fundamentals to tighten this year, largely due to the impacts of the coronavirus outbreak in China.

“EIA expects that travel restrictions in response to the coronavirus, along with the related economic slowdown in China, will reduce petroleum demand and keep crude oil prices below $60 per barrel through the first half of this year despite current disruptions to crude oil supply,” EIA Administrator Linda Capuano said in a statement Tuesday.

In its monthly Short-Term Energy Outlook EIA Tuesday forecast global oil supply to continue to outpace demand this year, but lowered its forecasts for both production and consumption.

EIA now forecasts total global liquids supply to average 101.97 million b/d in 2020 and total demand to average 101.74 million b/d, a 230,000 b/d gap. Last month, EIA forecast total supply to average 102.37 million b/d and demand to average 102.11 million b/d, a 260,000 b/d difference.

“EIA expects these oil consumption effects will be concentrated in China, but some effects will show up in other countries as well,” the EIA said in the report.

EIA cut its outlook for China’s liquid fuel demand to 14.8 million b/d between February and April, down 400,000 b/d from last month’s outlook.

“Jet fuel demand is likely to fall because of travel restrictions and demand for other oil products is likely to fall because of lower economic growth,” EIA said.

PRICES
**EIA forecasts Brent spot prices to average $61.25/b in 2020, down $3.58 from last month’s forecast, and WTI spot prices to average $55.71/b in 2020, down $3.54 from last month.

**”The lower price forecast reflects EIA’s expectations of slower growth in global petroleum and liquid fuels consumption in 2020,” EIA said.

**EIA forecasts Brent and WTI prices to average $67.53/b and $62.03/b, respectively, in 2021, the same as last month’s forecast.

**EIA said the implied volatility of crude prices in early February increased to their highest levels since September 2019 as premium for options contracts increased due to the uncertainty over global economic growth and supply disruptions in Libya.

**EIA sees relatively flat US retail gasoline prices, averaging $2.53/gal in 2020 and $2.63/gal in 2021, compared with $2.60/b in 2019.

SUPPLY
**EIA again lowered its forecasts for US crude oil output growth for both this year and next. US oil output will average 13.2 million b/d in 2020 and then climb by 360,000 to an average of 13.56 million b/d in 2021. Last month, EIA forecast US oil output to climb by 410,000 b/d from 13.3 million b/d in 2020 to 13.71 million b/d in 2021.

**EIA, which forecasts US oil output to average nearly 13.22 million b/d this month, a record, had last month forecast US oil output to cross 14 million b/d by November 2021. It now forecasts hitting that milestone a month later, in December 2021. US average monthly output crossed 13 million b/d in January, according to EIA.

**”The current outlook for U.S. crude oil production reflects slowing growth, with production expected to average 13.2 million barrels per day in 2020, up 8% from 2019, and 13.6 million barrels per day in 2021, a 3% increase from 2020,” Capuano said.

**EIA said most of the US growth will take place in the Permian.

**EIA cut its 2020 forecast for OPEC production by 260,000 b/d based on additional supply cuts expected between March and May, concerns of global demand growth, and recent supply outages in Libya.

**EIA now expects OPEC production to average 28.93 million b/d in 2020 and 29.21 million b/d in 2021.

**It expects OPEC to make cuts of 500,000 b/d from March through May, in addition to the cuts it announced in December 2019, in response to lower global demand in early 2020, including from travel restrictions related to the coronavirus outbreak.

**EIA estimates Libyan production fell to 780,000 b/d in January, from 1.15 million b/d in December, as unrest in the country shut export terminals. The outages became more severe in late January, and EIA estimates Libyan production fell below 200,000 b/d in the first week of February.

**The report said EIA expects OPEC to limit production through all of 2020 and 2021 to “target relatively balanced global oil markets.”
Source: Platts

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