IEA lowers 2020 oil demand forecast citing dismal aviation sector

The coronavirus pandemic has disrupted air travel. /VCG

The International Energy Agency (IEA) cut its 2020 oil demand forecast on Thursday, warning that reduced air travel due to the coronavirus pandemic would lower global oil demand this year by 8.1 million barrels per day (bpd).

The Paris-based IEA slashed its 2020 outlook by 140,000 bpd to 91.9 million bpd, its first downgrade in several months.

"Jet fuel demand remains the major source of weakness," the IEA said in its monthly report.

"In April the number of aviation kilometers traveled was nearly 80% down on last year and in July the deficit was still 67 percent... The aviation and road transport sectors, both essential components of oil consumption, are continuing to struggle."

The agency said that while supply exceeded demand in June, uncertainty over future demand along with increased output by top producers means re-balancing oil markets will be "delicate."

"By December 2021, global oil consumption will still be two percent lower than at the end of 2019," the IEA said.

While domestic travel had recovered in China and the United States, and the number of flights between European countries was increasing, "we estimate that global traffic was down around two-thirds from normal levels in July." That follows a drop of 75 percent in June and 79 percent in May.

"The northern hemisphere summer is normally the peak season for air travel, but this year's slow take-up indicates demand may remain suppressed for a while," the IEA said.

(With input from Reuters, AFP)