Global oil consumption is contracting rapidly and chances are that this year’s COVID-19 chaos will bring about the worst oil crisis in history, as countries are increasingly introducing anti-coronavirus measures that directly harm the oil industry, Bloomberg reported.
Workplace quarantines, travel bans and lockdowns of whole cities and even countries all negatively affect demand for fuel, driving it drastically downwards, while the latter can’t help but affect supply.
According to recent forecasts by oil traders and hedge fund managers, concerns have arisen that oil demand, which averaged over 100 million barrels a day in 2019, might dip the most ever sometime soon.
The crunch is believed to potentially surpass the huge loss of almost one million barrels a day during the 2009 downturn and even outrun the 2.65 million barrel dip back in 1980, when the world was struck by a second oil crisis due to the introduction of energy-saving technologies in Western countries.
“This global pandemic is something the world hasn’t witnessed since 1918”, Bloomberg cited Pierre Andurand, who runs the oil hedge fund Andurand Capital Management LLP, as commenting, further adding to his utterly bearish prognosis:
“I do not see how the demand drop wouldn’t be multiples of the drop witnessed during the global financial crisis”.
Per Bloomberg, Goldman Sachs, the top investment bank, is currently forecasting oil demand dips hitting well over four million barrels a day all the way from February to April, while Andurand sees the oil industry prospects in even bleaker light, saying the demand could dive by 10 million barrels a day.
Since the beginning of the year, oil prices have slumped by almost 50%, as the virus’ destructive impact on the global economy coincided with the OPEC+ breakdown, with no further oil cuts announced.
On Monday, Brent crude slumped 20%, which has been deemed the largest one-day drop since the Gulf War in 1991.
Days afterwards, a number of airlines introduced sweeping cuts to their daily routes, with Germany's Lufthansa, for instance, saying that it could bring down the number of flights by a staggering 70 percent.
British Airways, in turn, warned its staffers Friday that the UK’s aviation industry is facing a "crisis of global proportions" due to the COVID-19 spread, while the US’ United Airlines announced that it would be reducing its international schedule by 20 percent and domestic routes by 10 percent in April.
Overall, far fewer journeys are taking place across the board, with Italy and Spain having locked down whole cities, and severe cuts – of around 50 percent – in restaurant and hotel bookings registered in once frequented tourist destinations.
Per Worldometers.info, the total number of COVID-19 cases has to date climbed to 162,674, with 6,069 deaths from the virus having been registered around the world.