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Petroleum industry

Oil Prices Plummet Amidst Global Demand Concerns

Strategic Insights

— 1 min read

As the global economy continues to struggle, oil demand expectations have been revised downward by the International Energy Agency (IEA), leading to a sharp decline in crude oil prices. The IEA now forecasts global oil demand to total 83.4 million barrels a day this year, the lowest since 2004, sparking a 5.7% drop in light, sweet crude prices to $49.25 a barrel on the New York Mercantile Exchange. Meanwhile, Brent crude fell $2.54 to $51.52 a barrel on the ICE Futures exchange.

Key Takeaways:

  • The International Energy Agency (IEA) reduced its global oil demand forecast by 1.0 million barrels a day in response to the weak world economy, citing a 16-year high of 61.6 days in "forward cover" in member nations of the Organization for Economic Cooperation and Development (OECD) in February.
  • The IEA's report stated that the pace of oil demand contraction is approaching rates last seen in the early 1980s, with oil prices moving in tandem with equity markets as traders look for signs of future demand.
  • The Organization of Petroleum Exporting Countries (OPEC) has agreed to cut output by 4.2 million barrels a day since last year, with Iran's governor to the grouping suggesting further declines in oil demand could warrant an output cut at the organization's next meeting.
  • Independent energy analyst Paul Ting attributed the recent rise in Chinese crude imports to increased refinery operations and moderation in oil product inventories.
  • Front-month May reformulated gasoline blendstock (RBOB) and May heating oil prices fell by 4.7% and 5.3%, respectively, on the New York Mercantile Exchange.

Statistics:

  • Global oil demand forecasted to total 83.4 million barrels a day this year
  • IEA's February "forward cover" measurement at a 16-year high of 61.6 days
  • OPEC output cut since last year: 4.2 million barrels a day
  • China's crude imports in March: 3.86 million barrels a day (33% leap from February)
  • Front-month May RBOB price: $1.4110 a gallon
  • Front-month May heating oil price: $1.3526 a gallon

Sources:

  • International Energy Agency (IEA) monthly oil market report
  • Dow Jones Commodities News via Comtex
  • Dow Jones Newswires; 201-938-4377; greg.meyer@dowjones.com (END) Dow Jones Newswires 04-13-09 0949ET
  • The Organization for Economic Cooperation and Development (OECD)
  • Royal Dutch Shell PLC
  • Hamshahri paper

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