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article imageIEA: Collapse in oil demand is erasing the last decade of growth

By Karen Graham     Apr 15, 2020 in Business
The United States will suffer an "unprecedented" decline in oil output this year despite a historic agreement by some of the world's other big producers to slash supply with the aim of shoring up prices, according to the International Energy Agency.
In trading today, West Texas Intermediate (WTI) fell below $20 a barrel - to $19.75, while Brent crude dropped to $27.84 a barrel after the International Energy Agency (IEA) issued a report warning that a collapse in global consumption this year due to the coronavirus pandemic would wipe out a decade of growth.
Added to the gloom, gasoline consumption in the United States dropped to the lowest level on record while supplies of crude oil grew by almost 20 million barrels, according to the U.S. Energy Information Administration (EIA). The agency notes that in the first week of 2020, the price of a gallon of gas averaged $2.58.
The most recent Gasoline and Diesel Fuel Update (GDFU), published yesterday, reports that the average U.S. retail gasoline price has fallen to $1.85 per gallon as of April 13, the lowest U.S. average gasoline price since early 2016.
Production cuts agreed to by OPEC+ members are supposed to start next month, however, oil is continuing to flood the market, while U.S. production has barely declined, according to Bloomberg. “Whatever production that we are cutting back is not going to offset the demand destruction,” said Stephen Schork, president of the energy consultancy Schork Group Inc.
"There is no feasible agreement that could cut supply by enough to offset such near-term demand losses," the IEA said notes CNN, adding that the production cuts are still a "solid start" that could eventually help to reduce the supply glut. The IEA expects global demand in April to plunge by 29 million barrels a day, compared to a year ago, reaching a level last seen in 1995.
For the year, demand will drop by a record 9.3 million barrels a day. Global inventories will accumulate by 12 million barrels a day in the first half of the year. The world has run out of places to store oil, and the IEA warns that the build-up "threatens to overwhelm the logistics of the oil industry — ships, pipelines and storage tanks — in the coming weeks."
More about International energy agency, Oil production, coronavirus, epic demand decline, oil futures
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