Yesterday, OPEC said it was lowering its estimate for oil demand for the remainder of 2020 and beyond, as coronavirus cases surge in the United States and elsewhere. Today, in its November oil market report, the International Energy Agency (IEA) revised its estimates down by even more than OPEC.
The agency now thinks demand will drop through the first quarter of 2021, with the nadir being 2020's fourth quarter. Overall, it believes oil demand for 2020 will be down by 8.8 million barrels per day (mb/d), compared to its previous estimate of 8.4 mb/d in its October report.
The IEA did get somewhat more optimistic for 2021, and raised its growth forecast from 5.5 mb/d last month to 5.8 mb/d. But demand growth won't be until the latter part of the year. "Vaccines are unlikely to significantly boost demand until well into next year," it said in the November report.
Though oil prices jumped earlier this week after positive news regarding an effective coronavirus vaccine, the IEA said it does not anticipate any real impact on oil demand until the second half of 2021. The agency lowered its global demand forecast due to virus containment measures that will be needed due to "surging caseloads, particularly in Europe and the United States."
With the price of oil holding near $40 per barrel, energy giants continue to react with cost savings measures. BP (NYSE:BP) and Royal Dutch Shell (NYSE:RDS.A) (NYSE:RDS.B) have cut their dividends, and ExxonMobil (NYSE:XOM) said in its third quarter earnings call that it anticipates a 15% decrease in its global workforce by year-end 2022, versus 2019 levels.