Global oil demand is set to contract in 2020, the first full-year decline in more than a decade, the International Energy Agency said on Monday.
"For 2020 as a whole, the magnitude of the drop in the first half leads to a decline in global oil demand of around 90,000 bpd, the first annual fall since 2009," the organisation said in its monthly oil market report.
The coronavirus crisis is "affecting a wide range of energy markets – including coal, gas and renewables," said Fatih Birol, IEA executive director.
"But its impact on oil markets is particularly severe because it is stopping people and goods from moving around, dealing a heavy blow to demand for transport fuels," she added.
The IEA cited the slowdown in China, where the government restricted the movement of its population to contain the virus, which originated in the Hubei province, as the main factor behind its outlook. China, the world's largest importer of oil, accounts for 80 per cent of global oil demand, according to the IEA.
Oil markets suffered their worst daily trading in more than 28 years on Monday. Prices slumped as much as 31 per cent after and alliance between Opec oil producers and other non-members of the group, led by Saudi Arabia and Russia, collapsed. The pact was forged in 2016 to draw down global inventories and balance the markets when needed, particularly with the rise in US shale supply.
Brent, the international benchmark recovered slightly but was down 20.1 per cent to $36.15 per barrel at 1.13pm UAE time, while West Texas Intermediate was down 21.7 per cent at $32.31 per barrel.
The benchmarks felt the most in daily trading since the 1991 Gulf War, as Saudi Arabia indicated by slashing its price for Asian buyers that it could increase production to as much as 10.5 million barrels per day following the expiration of the Opec+ pact end of April.
The Saudi-Russian pact was instrumental in withdrawing 1.7 million bpd from the markets since January. With Russia opting out of additional cuts of 1.5 million bpd to respond to the slowdown in demand from the spread of the coronavirus, the markets are in free fall, with producers now likely to pump at will.
"The door remains open for further collaboration with indications of informal discussions continuing," said Monica Malik, chief economist at Abu Dhabi Commercial Bank. "However, a return to the policy of producers looking to maintain their market share and increasing output would place further downward pressure on the oil price."
While data remains unclear, the visible decline in transport, industrial and commercial activity has led to a massive contraction in global oil demand of 2.5 million bpd in the first quarter of the year, compared with the same period last year, IEA said.
The agency expects a pick-up in demand in the second half of the year, with growth expected at 1.1. million bpd, compared with the same period last year.