Demand destruction is pervasive and there’s too much damn oil.
That is still the message and it’s likely to be the refrain for the foreseeable future – coordinated efforts to curb production and balance the market notwithstanding.
The EIA said Wednesday that crude supplies swelled by nearly 20 million barrels last week. That’s a new record, and it marks the third consecutive massive weekly stock build.
Overall, stockpiles in the US have risen for a dozen weeks running.
Meanwhile, the IEA said demand will fall by more than 9 million barrels per day in 2020. Here is the stunning excerpt from the April OMR:
Global oil demand is expected to fall by a record 9.3 mb/d year-on-year in 2020. The impact of containment measures in 187 countries and territories has been to bring mobility almost to a halt. Demand in April is estimated to be 29 mb/d lower than a year ago, down to a level last seen in 1995. For 2Q20, demand is expected to be 23.1 mb/d below year-ago levels. The recovery in 2H20 will be gradual; in December demand will still be down 2.7 mb/d y-o-y.
This is another case where everyone has heard the projections and ostensibly steeled themselves for more dour forecasts, but it’s still difficult to wrap one’s head around the figures.
Analysts and industry observers have, for the better part of two months, warned that near-term demand destruction was likely between 20 million and 30 million barrels per day, making a mockery of the 9.7 million in supply curbs pledged by OPEC+. The IEA’s full-year, 9.3 million estimate makes for a poignant visual.
Notably, that estimate assumes travel restrictions are eased in the second half of the year. That is, this projection won’t necessarily get better even if people are back in the air and back on the road in six months.
If the projection pans out, the IEA says it will “erase almost a decade of growth”.
And it gets better (or worse, depending on how you want to look at things). “The implied stock build-up of 12 million barrels per day in the first half of the year threatens to overwhelm the logistics of the oil industry — ships, pipelines and storage tanks — in the coming weeks”, the IEA cautions, in the same April report, before warning that on their estimates, “available capacity could be saturated in mid-year”.
Other highlights from the US government data out Wednesday show US imports of crude sliding to the lowest since February of 1996, while fuel demand fell to the lowest on record.
Speaking during a webinar after releasing the agency’s monthly report, IEA Executive Director Fatih Birol said 2020 may very well go down as the “worst year in the history of global oil markets.” That is a quote.
Birol described planned production cuts by OPEC+ and G20 nations as a “partial offset”, but said this month will be remembered as “black April”.
The production cuts won’t be in effect for another two weeks at least.
Needless to say, crude wasn’t amused with any of this. WTI traded below $20 on Wednesday, bumping haplessly along near a two-decade, listless nadir.