Demand for crude oil will likely see the biggest slump in the second quarter since the Covid pandemic slammed the global economy in 2020, the International Energy Agency said Tuesday.
Surging prices caused by the war in the Middle East will force many countries and industries to curb oil use, and “demand destruction will spread as scarcity and higher prices persist”, the agency said in its monthly report.
It noted that its forecasts assume a “base case” of oil shipments resuming in May through the Strait of Hormuz, which Tehran has effectively closed since the US and Israel began bombing Iran on February 28.
This would lead to a decline in demand of 1.5 million barrels per day (bpd) in the second quarter, “the sharpest since Covid-19 slashed fuel consumption”, the IEA said.
Overall demand is forecast to have contracted by 800,000 bpd in March and is seen dropping by 2.3 million bpd in April.
But a “protracted case” if the strait remains closed could see oil demand plunge even further, the IEA said.
“In this case, energy markets and economies around the world need to brace for significant disruptions in the months to come,” it warned.
It also noted that a major beneficiary of the Mideast disruptions has been Russia, which nearly doubled its earnings from oil exports in March after the United States eased sanctions on Russian crude to help offset soaring energy prices.
Russia earned $19 billion last month as crude and oil product exports soared to 7.1 million barrels per day, an increase of 320,000 barrels a day from February, the IEA said.
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