IEA: OPEC Can’t Save The Oil Market
By Tsvetana Paraskova - Apr 03, 2020, 7:30 PM CDT
OPEC Oil Market
Even if the OPEC+ group and other major oil producers in the world were to agree to deep production cuts, they would be unable to prevent what is sure to be an enormous global inventory build this quarter due to unprecedented demand destruction, Fatih Birol, Executive Director of the International Energy Agency (IEA), told Reuters on Friday.
The measures many countries have taken to try to flatten the curve of the coronavirus pandemic are destroying unprecedented volumes of oil demand as more than 3 billion people—from India to Europe to the United States—remain in lockdown.
As a result of restricted commuter travel, grounded flights, and economic slowdown, demand for oil in April is expected to drop by 20 million bpd year on year, and probably more.
Even if OPEC+ plus other producers were to discuss, agree to, and implement a collective cut of 10 million bpd, global oil inventories would still rise by 15 million bpd in the second quarter, the IEA’s chief told Reuters.
Earlier this week, the IEA said that the world has seen some oil shocks before, but “none has hit the industry with quite the ferocity we are witnessing today.”
The reason the shock is unique this time around, the IAE says, is because one of the usual stabilization factors, consumers, is unable to do its part. As billions of people around the world are still in lockdown, consumers are unable to react to falling prices like they usually do—by consuming more. So for as long as the pandemic lasts, boosts in demand that were seen during other oil shocks are “highly unlikely.”
Meanwhile, producers from the OPEC+ group and from another group are expected to discuss potential ways to react to the massive demand loss and the low oil prices that hit their lowest level in 18 years earlier this week.
While U.S. President Donald Trump touted a cut of 10 million bpd, and possibly 15 million bpd, many oil analysts, cited by Reuters, remain highly skeptical that an agreement of these proportions could be reached and implemented.
IEA: OPEC Can’t Save The Oil Market
Re: IEA: OPEC Can’t Save The Oil Market
Keep in mind that a lot of oilfields were marginal at $50 oil. At $30 oil we will see a significant decline in supply just from unprofitable oilfields being shut in and eventually completely abandoned. Low oil prices balance supply and demand at both ends: Old fields are abandoned and new fields are not developed.
I know you disagree with me on this, but EVENTUALLY we have to live with COVID-19 because this shutdown cannot go on. It is my OPINION that double digit unemployment will lead to lots of poverty which will cause more death than the virus. We had ~50,000 suicides in the U.S. last year. If unemployment goes to 15% to 20% we will have a lot more. Poverty leads to more crime and more illness.
I know you disagree with me on this, but EVENTUALLY we have to live with COVID-19 because this shutdown cannot go on. It is my OPINION that double digit unemployment will lead to lots of poverty which will cause more death than the virus. We had ~50,000 suicides in the U.S. last year. If unemployment goes to 15% to 20% we will have a lot more. Poverty leads to more crime and more illness.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: IEA: OPEC Can’t Save The Oil Market
Keep in mind that a lot of oilfields were marginal at $50 oil. At $30 oil we will see a significant decline in supply just from unprofitable oilfields being shut in and eventually completely abandoned. Low oil prices balance supply and demand at both ends: Old fields are abandoned and new fields are not developed.
We agree. Read David Messler's prediction here about where shale production could be (loss of 6m bpd). https://oilprice.com/Energy/Crude-Oil/H ... ly-Go.html I have read many anecdotal reports of shut ins. Understandable with prices below cost and storage capacity getting tight. Government should do taxpayers a favor and buy crude for SPR now instead of just storing it there; that would help incrementally.
I know you disagree with me on this, but EVENTUALLY we have to live with COVID-19 because this shutdown cannot go on. It is my OPINION that double digit unemployment will lead to lots of poverty which will cause more death than the virus. We had ~50,000 suicides in the U.S. last year. If unemployment goes to 15% to 20% we will have a lot more. Poverty leads to more crime and more illness.
Actually, we mostly agree. We do have to live with COVID-19 (it will be with us, like it or not); the problem is how many citizens will die from it (or incur lasting pulmonary injury) in a short period before we develop effective treatments and a vaccine, and what must we do in the meantime to prevent our healthcare system from crashing. We now have 1,300 COVID-related deaths per day, and the daily new case, death, and active case (>270,000) numbers are still rising rapidly, partly because some have not been doing their part to mitigate. Hopefully as the numbers continue to rise, and are reported, the non-believers will get the message.
Also agree about the social costs of unemployment/poverty (though I'm doubtful we will ever see > 1,300 additional suicides per day). It would be catastrophic if unemployment reaches 20%; the amount of poverty, suffering and chaos would be unprecedented. Hope is not a strategy, but it is inspiring to see government and the scientific community moving so rapidly to develop treatment/vaccines/testing that will be critical to informed easing of mitigation measures and, longer term, avoiding large secondary COVID waves around the country.
We agree. Read David Messler's prediction here about where shale production could be (loss of 6m bpd). https://oilprice.com/Energy/Crude-Oil/H ... ly-Go.html I have read many anecdotal reports of shut ins. Understandable with prices below cost and storage capacity getting tight. Government should do taxpayers a favor and buy crude for SPR now instead of just storing it there; that would help incrementally.
I know you disagree with me on this, but EVENTUALLY we have to live with COVID-19 because this shutdown cannot go on. It is my OPINION that double digit unemployment will lead to lots of poverty which will cause more death than the virus. We had ~50,000 suicides in the U.S. last year. If unemployment goes to 15% to 20% we will have a lot more. Poverty leads to more crime and more illness.
Actually, we mostly agree. We do have to live with COVID-19 (it will be with us, like it or not); the problem is how many citizens will die from it (or incur lasting pulmonary injury) in a short period before we develop effective treatments and a vaccine, and what must we do in the meantime to prevent our healthcare system from crashing. We now have 1,300 COVID-related deaths per day, and the daily new case, death, and active case (>270,000) numbers are still rising rapidly, partly because some have not been doing their part to mitigate. Hopefully as the numbers continue to rise, and are reported, the non-believers will get the message.
Also agree about the social costs of unemployment/poverty (though I'm doubtful we will ever see > 1,300 additional suicides per day). It would be catastrophic if unemployment reaches 20%; the amount of poverty, suffering and chaos would be unprecedented. Hope is not a strategy, but it is inspiring to see government and the scientific community moving so rapidly to develop treatment/vaccines/testing that will be critical to informed easing of mitigation measures and, longer term, avoiding large secondary COVID waves around the country.