IEA plans to revise down oil demand forecasts due to coronavirus – Bloomberg

Amid the coronavirus carnage that is weighing on the riskier assets, Bloomberg came out with the news that the International Energy Agency (IEA) plans to revise down its oil-demand forecasts next week.

Key quotes

‘I am going to announce it Monday morning in Paris,’ IEA chief Fatih Birol told a Congressional hearing in Washington on Thursday. ‘The impacts are already severe mainly because the transport sector is heavily affected.’

Last month, the Paris-based adviser to industrialized nations warned that the virus could curb annual growth in oil consumption to the lowest since 2011, but still called for 800,000 barrels a day of growth.

Other analysts are now estimating that demand will contract, with Goldman Sachs Group Inc. predicting that consumption could shrink this year for only the fourth time in almost 40 years.

The IEA will set out two scenarios when it updates forecasts next week, one of which is a base case that will reflect the current impact.

In written testimony to the committee, Birol said it’s already clear that the outbreak is ‘negatively affecting global economic activity and that the IEA is “monitoring the situation extremely closely.’

Market implications

While the coronavirus fears are already weighing on the commodity basket, news like this exert additional downside pressure on the WTI, which is currently down 1.19% to $45.50. Earlier, speculations ran through the markets that the Organization of the Petroleum Exporting Countries (OPEC) recommendation of 1.5 billion barrel a day production cut will be for the whole of 2020 rather than till the end of the second quarter (Q2).