In its latest monthly oil market report, the International Energy Agency (IEA) is cutting its global oil demand forecast for 2020 by about 4% compared to its last monthly report. It still sees a rebound in 2021 with demand estimated to grow by 5.5 million barrels per day (BPD).   

The agency says that impacts from a resurgence of COVID-19 in many countries drove the revised forecast. Global demand from January to July dropped by 10.5 million BPD compared to last year due to impacts from the coronavirus pandemic. 

drawing of oil wells with red down arrow representing drop

Image source: Getty Images.

The report noted that demand in China has recovered, but cited "renewed weakness" in India. "Uncertainty created by Covid-19 shows little sign of abating," said the report. Continued lockdown measures are extending teleworking and weakness in the aviation sector remains. The IEA says that 57% of global oil demand comes from "mobility."  

For the full year 2020, the new estimated demand level is 91.7 million BPD. This level of demand was last seen in 2013. It compares to the recent forecast by OPEC of 90.2 million BPD on average for 2020.  

In August, OPEC+ reduced some previously implemented production cuts. Higher overall production combined with falling demand also caused the IEA to reduce its level of stock drawdowns expected. Chinese purchases of crude, which had been supporting pricing, slowed greatly for September and October deliveries, the agency said. It also sees renewed demand for charter ships to store oil for trading houses, indicating an oversupply. This combines for a weakening outlook for crude pricing going forward.