The move was announced as part of the efforts to contain the impact of the COVID-19 outbreak on global oil demand forecasts in 2020.
Speaking after OPEC announced its recommendation of a 1.5 million barrel per day (b/d) output cut, Ann-Louise Hittle, vice president, Macro Oils at Wood Mackenzie, said:
OPEC’s recommendation sends a strong message. It is a good decision, but its success hinges on compliance. It shows the producers’ group is serious about getting on top of the oversupply in the market. Compliance itself probably won't be full, but moderate adherence should be enough to stabilise the market through the second quarter.
According to Mrs. Hittle, world oil demand is expected to fall 2.7 million b/d in the first quarter, representing a massive drop.
China’s demand alone is expected to fall by 2.3 million b/d in the first quarter.
The drop in global demand is the most severe the market has seen since the fourth quarter of 2008, at the height of the global economic crisis.
Nevertheless, the scale and scope of the coronavirus outbreak – and the impact it will have on global oil demand – is still uncertain, Wood Mackenzie noted.
It is the most severe decline since Q4 2008, the height of the 2008-2009 global economic crisis, which saw demand tumble by 2.8 million b/d year-on-year.
Wood Mackenzie is monitoring the situation closely and may revise its demand forecast further, should coronavirus containment measures be extended widely and more deeply.
Our monthly forecast sees the impact on demand focused mainly on jet fuel outside China. At this stage, we also see a recovery in Chinese demand during the second quarter as workers return to their jobs.