Global energy demand at huge risk

Top Stories

Global energy demand could slump by 6 per cent, according to the IEA.
Global energy demand could slump by 6 per cent, according to the IEA.

Dubai - Coronavirus to trigger biggest-ever plunge in energy demand, emissions

by

Issac John

  • Follow us on
  • google-news
  • whatsapp
  • telegram

Published: Thu 30 Apr 2020, 9:23 PM

Last updated: Sun 3 May 2020, 10:03 PM

The pandemic-prodded widespread global recession-lockdown is expected to cut global energy demand and carbon dioxide emissions by record amounts in 2020, the International Energy Agency (IEA) said on Thursday.
Given that the recovery from the depths of the lockdown recession is only gradual and is accompanied by a substantial permanent loss in economic activity, global energy demand could slump by 6 per cent, the largest in 70 years in percentage terms and the largest ever in absolute terms. "The impact of Covid-19 on energy demand in 2020 would be more than seven times larger than the impact of the 2008 financial crisis on global energy demand," the Paris-based IEA said.
"Some countries may delay the lifting of the lockdown, or a second wave of coronavirus could render our current expectations on the optimistic side," IEA executive director Fatih Birol said. "At the current pace in the oil market, we may well see around mid-June the global storage capacity can be full," he said.
"Beyond the immediate impact on health, the current crisis has major implications for global economies, energy use and CO2 emissions."
"Our analysis of daily data through mid-April shows that countries in full lockdown are experiencing an average 25 per cent decline in energy demand per week and countries in partial lockdown an average 18 per cent decline. Daily data collected for 30 countries until 14 April, representing over two-thirds of global energy demand, show that demand depression depends on duration and stringency of lockdowns," the IEA said.

While oil demand could drop by 9 per cent, or 9 mb/d on average across the year, returning oil consumption to 2012 levels, coal demand could decline by 8 per cent, in large part because electricity demand will be nearly 5.0 per cent lower over the course of the year. Gas demand could fall much further across the full year than in the first quarter, with reduced demand in power and industry applications. Nuclear power demand would also fall in response to lower electricity demand. Renewables demand is expected to increase because of low operating costs and preferential access to many power systems, IEA said

"Global CO2 emissions are expected to decline by8.0, or almost 2.6 gigatonnes (Gt), to levels of 10 years ago. Such a year-on-year reduction would be the largest ever, six times larger than the previous record reduction of 0.4 Gt in 2009 - caused by the global financial crisis - and twice as large as the combined total of all previous reductions since the end of World War II. As after previous crises, however, the rebound in emissions may be larger than the decline, unless the wave of investment to restart the economy is dedicated to cleaner and more resilient energy infrastructure,' it said.

Mark Haefele, chief investment officer at UBS Global Wealth Management, said: "While the oil market is heavily oversupplied this quarter, we expect it to move toward balance next quarter and become under-supplied in Q4 this year as lockdown restrictions are eased and oil demand picks up."

"We expect the market to sternly test global storage capacity in the coming 2-3 weeks which will likely lead to significant volatility with more spikes to the downside to front-month oil prices. This will continue until we reach the equilibrium of supply equating demand, given storage and filling capacity constraints - as with nowhere to store the oil, supply has no other option but to be shut-in in-line with the expected demand losses," said Ehsan Khoman, Director, Head of Mena Research and Strategy.

"It is at this inflection point that we view demand-supply fundamentals will become instantaneously balanced, carving out a cyclical bottom in oil prices. As such, whilst this ultra-bearish market is not yet over, with more downward volatility in the next 2-3 weeks, we now expect a rebound in prices once forced shut-ins soon fall sizably enough to drive markets to become balanced by late May - early June. Thus, we see upside risks to our end Q2 2020 Brent and WTI forecasts of $32/b and $28/b, respectively," said Khoman. Meantime, oil prices jumped on Thursday, buoyed by signs that the U.S. crude glut is not growing as quickly as expected and that fuel demand battered by COVID-19 restrictions is starting to pick up.

- issacjohn@khaleejtimes.com


More news from