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Coronavirus has caused 'sharpest downturn in energy and oil demand in living memory', says OPEC's 2020 World Oil Outlook

Brent crude was priced above US$43 on Friday with west Texas Intermediate (WTI) holding above US$41 a barrel

Oil refinery picture
Barkindo said 2020 was “one of the most tumultuous periods in the history of oil,” but the good news is that OPEC believes that “oil will continue to account for the largest share of the energy mix by 2045"

The oil price rebounded this week with both benchmarks claiming the more comfortable price above US$40 a barrel.

OPEC released a bullish World Oil Outlook to 2045 and bad weather and worker strikes also impacted the price. In Friday trading, Brent crude was priced above US$43 with west Texas Intermediate (WTI) holding above US$41 a barrel.

Hurricane season in the Gulf of Mexico will continue to threaten assets with gas and oil production shut down in anticipation of Hurricane Delta.

It's estimated that more than 90% of the offshore production will be temporarily halted until the storm passes. More than 60% of gas production will also be shut in.

This year's World Oil Outlook

OPEC launched its World Oil Outlook this week with a 2-hour virtual in-depth discussion led by the organisation’s Secretary General Mohammad Barkindo.

The report revised down global oil demand in the near term and in the longer term, having capped out at 99.7 million barrels a day in 2019. 

Barkindo said 2020  was “one of the most tumultuous periods in the history of oil,” but the good news is that OPEC believes that “oil will continue to account for the largest share of the energy mix by 2045".

The president of Prestige Economics, Jason Schenker said “liquid hydrocarbons are the most efficient form of portable energy for a growing world,” adding, “for an increasingly wealthy growing world, demand for oil is likely to continue to rise over time".

This year’s global oil demand will be lower due to Covid-19 impact, but OPEC held on to the longer, more optimistic recovery of more than 109.3 million barrels a day in 2040 and decline thereafter.

"Global oil demand will grow at relatively healthy rates during the first part of the forecast period before demand plateaus during the second half.”

Impact of COVID-19

Talking about the impact of Covid-19 on the oil market, the report said that it had resulted in the “sharpest downturn in energy and oil demand in living memory.” The World Oil Outlook lays out various scenarios into the future.

There was no update offered on production levels for the close of this year when the production agreement with OPEC+ is set to alter.

Norwegian oil union workers remain on strike this week in a dispute that could wipe out a quarter of Norway’s oil production.

A statement from Equinor said that if this continues until the middle of the month when there is scheduled staff rotation, “the Johan Sverdrup field in the North Sea will have to close production until further notice”.

The disagreement between the Norwegian Oil and Gas Association and the Lederne union began at the end of September when both sides failed to come to an agreement over pay conditions for onshore and offshore.

Oil prices are down more than 30% this year, but the price remains rangebound in the early forties and for now, the industry is learning to live with this.

Negative demand shocks like we are seeing this year should be temporary, but with a global population growing and energy demand on the increase, the need for oil and gas will no doubt see an upswing in months and years to come.

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