The Organization of the Petroleum Exporting Countries (OPEC) has revised lower its world oil demand growth forecast for 2020 by 6.9 million barrels per day.

In its monthly report, the organization also projected that the oil demand will contract in the second quarter of this year by around 12 mb/d. It added that April will see the worst contraction at about 20 mb/d.

OPEC explained that the impact of the COVID-19 outbreak in China in 1Q20, and its negative impact on transportation and industrial fuels in the country, has since spread globally and is now affecting oil demand growth in most other countries and regions, with an unprecedented impact on global oil demand, transportation fuels in particular.

“As a result, the Organization for Economic Co-operation and Development (OECD) oil demand is revised lower by 3.7 mb/d to decline by 4.0 mb/d, while non-OECD oil demand growth is adjusted lower by 3.2 mb/d to contract by 2.9 mb/d for the year,” reads the report.

Considering latest developments, and the large uncertainties going forward, the reported noted that downward risks remain significant, suggesting possibility of further adjustments, especially in the 2Q, should new data and further developments warrant revisions.

It estimated that demand for OPEC crude in 2019 at 29.9 mb/d, 1.2 mb/d lower than the 2018 level.

Following the recent agreement reached at the extraordinary OPEC and non-OPEC Ministerial Meetings, the demand for OPEC crude in 2020 is expected at 24.5 mb/d, around 5.4 mb/d lower than the 2019 level, though this remains heavily subject to uncertainty surrounding current market conditions.

It forecast that the world economy will face a severe recession in 2020, declining by 1.5 percent, following global economic growth of 2.9 percent in the previous year.

“Within the OECD, the US is forecast to contract by 4.1 percent in 2020, following growth of 2.3 percent in 2019. An even larger decline is expected in the Euro-zone, where economic activity is forecast to fall by 6.0 percent in 2020, compared to growth of 1.2 percent in 2019,” OPEC expected.

The report unveiled that the crude oil prices collapsed in March 2020, recording their deepest monthly drop since the global financial crisis in 2008.

“The ramifications of the COVID-19 pandemic were the main driving force, resulting in unprecedented worldwide oil demand shock and massive sell-offs in the global oil markets, amid a significant crude surplus,” reads the report.

The OPEC Reference Basket (ORB) value was down by USD 21.61, or 38.9 percent, month-on-month, to stand at USD 33.92/b, the lowest monthly value since September 2003.

Brent Crude Futures declined by USD 21.75, or 39.2 percent, month-on-month, to average USD 33.73/b, while NYMEX WTI fell USD 20.09, or 39.8 percent, to average USD 30.45/b.

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