The coronavirus outbreak has led the world’s biggest oil traders to slash their projections for global demand growth to the weakest levels since the financial crisis, with many expecting consumption to stay steady or even shrink in 2020 Vitol, Trafigura and Gunvor, which together shift almost 15m barrels of oil eacl day through their vast trading operations, all now see demand either flatlining or growing only marginally this year. Consumption could even contract, they warn, if the virus is not contained rapidly and continues to weigh on economic activity.
Consultancies have already sharply cut their forecasts for global oil demand growth in 2020. But the projections from traders more intimately involved in the market will add pressure on Opec and Russia to agree deep cuts in output as they meet over the next two days to arrest crude’s fall from $70 to $50 a barrel since January. Opec reached a preliminary agreement on Thursday to cut output by 1.5m barrels a day in conjunction with its allies, but still needs to secure the support of Russia on Friday.
“We’re a lot closer to zero growth in oil demand for 2020 than we ever thought we would be,” said Ben Luckock, Trafigura’s co-head of oil trading, arguing that theimpact of the virus was greater than many analysts had expected. Trafigura expects demand to be severely depressed for most of the first half, before recovering by the end of the year. “It takes a while to filter through the system, but it could be disastrous for demand in March,” Mr Luckock said.
Since the beginning of the commercial oil market in the 19th century it has been rare for annual demand to drop, with contractions generally limited to recessions, as in 2008 , or dramatic spikes in price, such as during the Arab oil embargoes of the 1970s . Demand hit a record 100m barrels a day in 2019, and before the viral outbreak had been expected to grow by at least 1m b/ d this year. Torbjorn Tornqvist, chief executive of Gunvor, said global oil demand had already dropped by about 2m b/d in the first quarter because of the impact of coronavirus and a mild winter in the nort hern hemisphere.