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COVID-19 REPORT 6TH EDITION
GLOBAL OUTBREAK OVERVIEW AND ITS IMPACT ON THE ENERGY SECTOR
15 APRIL 2020
PUBLIC VERSION
Executive summaryOutbreak status and outlookImpact on oil demandImpact on the oil and gas industryAppendix
Table of Contents
2
3
Executive summary
This week the global picture looks like a mixed bag. Several countries in Europe have gained control over the pandemic and are beginning to loosen social distancing measures. In Norway, kindergartens, hairdressers and opticians will be allowed to reopen under certain conditions. Similar plans are rolling forward for Austria, the Czech Republic and Germany. Increased testing combined with the implementation of mobile phone apps for virus tracking will also be introduced to help these societies manage the virus while loosening measures. Monitoring the development of the virus in these countries, as well as in China and South Korea, could serve as an early case study, shedding light on the potential duration of the virus and the depth of impact it may have on the general economy as well as the energy markets.
On the other hand, the situation in the UK, Russia and Bangladesh, as well as in US states New York and New Jersey, is rapidly worsening. The worst is still to come in these and many other countries. In New York, daily fatalities are now at 4 per100,000, more than twice the peak levels seen in Spain and Italy.
Global road traffic this week was at the lowest level seen in many years, down an additional 10% versus last week. The number of passenger flights was down more than 90% for seven key countries, and down 58% for the US. This leads to a global oil demand destruction of 27.5 million barrels per day (bpd) in April, a similar decrease as forecasted in last week’sreport. Jet fuel demand will probably reach only 2.3 million bpd in May versus pre-Corona estimates of 7.3 million bpd.
We also anticipate that fields will need to be shut-in globally as storage will quickly fill to its limit. The current OPEC+ deal will contribute to these shut-ins, but the announced cuts are not large enough to secure a market balance. More shut-ins will be necessary, in addition to filling up strategic petroleum reserves. Oil producers will probably still see the business case for such shut-ins as high oil prices are expected in 2022. Nevertheless, some capacity that will be shut-in will still struggle to return online quickly when demand resurges. Additionally, the lower level of infill drilling will result in a base production level that is insufficient when fields are reopened, resulting in an oil shortage in 2022.
ICU bed need in Europe and the US, page 7
Traffic reduction in the US, Canada and Brazil, page 12
Reduction in flights, page 24
Executive summaryOutbreak status and outlook
• Global overview• Managing the virus• Key countries: US, Canada, Brazil
Impact on oil demandImpact on the oil and gas industryAppendix
Table of Contents
4
Global overviewThe true number of people infected globally is likely 39 million
Number of true and reported casesCases (log scale)
* Reason for 0.5% given in the methodology chapter “Calibrating ICU bed capacity”Source: Rystad Energy Covid-19 research and analysis
1
10
100
1,000
10,000
100,000
1,000,000
10,000,000
100,000,000
Fatalities
As of 14 April, 39 million people have likely been infected with Covid-19, according to our updated model.
Reported cases were approximately 2 million as of 14 April, a number which our analysis suggests represents just 5% of true cases. Reported cases grew last week by 5%, down from 9% growth seen the previous week, and 13% and 17% growth seen respectively over the previous two weeks. This is further evidence that quarantine measures are working. Growth is no longer exponential, but now appears linear, with 80,000 new reported cases per day on average over the last two weeks trending slightly downwards.
Registered fatalities globally were 125,000 as of 14 April, a number which grew by 6% over the last week versus the 11%, 14% and 19% growth seen respectively over the previous three weeks. Since the growth in reported fatalities fell downwards significantly, we have revised the contact rate (CR) under curfew within our models to 2.
In this edition we present one scenario, wherein current strict measures are maintained. However, in this edition we have extended these measures until 1 June. Since China now comprises a small portion of the total, China is no longer omitted from the figures. In this scenario, 56 million people will be infected across the globe by June 1.
Week 16Week 15
5
Deviation since figures last week did not include China
Global overviewEurope alone has more cases than the rest of world, but other continents are growing faster
6
Number of cases by regionCases (log scale); assumes “Current measures” scenario
Source: Rystad Energy Covid-19 research and analysis
100
1000
10000
100000
1000000
10000000
100000000 As of 14 April, an estimated 23 million people were infected in Europe, 10.2 million in North America and 6 million in the rest of the world.
All figures have been adjusted upwards versus 1 April figures due to a larger than expected increase in fatalities and reported cases.
In the scenario shown here, which factors in all currently implemented measures, the number of true cases will flatten out towards 1 June.
Europe
Asia
North America
South America
Middle East
Russia
Australia
Africa
ContinentTrue cases 14 April
Reported cases 14 april
Share reported
Europe 23 202 881 914 523 3.9 %
America N 10 145 494 640 921 6.3 %
Middle East 1 993 316 172 236 8.6 %
Asia 1 695 666 148 897 8.8 %
America S 1 340 470 66 820 5.0 %
Africa 366 883 16 403 4.5 %
Russia 184 958 21 102 11.4 %
Australia 25 597 7 857 30.7 %
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5
10
15
20
25
30
35
40
Global overviewNew York currently has twice the need of critical care versus European countries
Number of critical sick patient in need of ICU bedsCases per 100 000 – “Maintain current measures” scenario
Source: Rystad Energy Covid-19 research and analysis; Halpern et al. U.S. ICU Resource Availability for COVID-19, Society of Critical Care Medicine, 3 March 2020
7
New York
Spain
France
Italy
In Spain, France and Italy, we have confirmed the number of people likely in need of Intensive Care Units (ICU) per day.
The relationship between ICU beds in use and daily fatality has been respectivley 6, 8 and 10 for Italy, France and Spain.
For New York, we do not have explicit figures for ICU bed use. Our model, as shown here, applies a similar relationship.
Currently there are 4 fatalities per 100,000 inhabitants per day in New York, which results in an ICU bed need of 30 to 35 per 100,000.
ICU bed capacity in European countries is around 10 per 100,000 persons. Spain and parts of Italy are already exceeding this capacity. The US has higher ICU capacity relative to the population (Halpern et al*). Still, the current situation in New York looks critical for the next three weeks.
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1
AustriaCzechiaGermanyNorwaySweden
Global overviewTime to loosen up for some countries?
Number of fatalities per day per 100,000 for five European countriesNew fatalities per 100,000 – “Maintaining current measures” scenario
* Kindergarten open 20 April, Hairdressers etc. open 27 April in Norway.Source: Rystad Energy Covid-19 research and analysis
8
Here we show five European countries, of which four have implemented fairly strict social distancing measures, while Sweden has had looser measures.
The effect of the measures are very visible here – fatalities seem to have peaked and the infection seems to be under control for the four countries with strict measures. Sweden has stopped the exponential growth of the virus, however the country has seen a higher level of fatalities.
Germany, Sweden, Norway and the Czech Republic are all planning to somewhat loosen social distancing measures, for example by opening kindergartens and allowing some needed professions, such as hairdressers, to go back to work*.
With extensive testing and new mobile phone apps that aid in tracking, these countries expect to continue to have the spread of the virus under control, and do not expect to return to infection levels on-par with Sweden.
Thus, following the development of the virus in these countries will be a crucial case study for other global societies looking to test the waters and return to more normal economic activity.
Source: Google Mobility Report; Rystad Energy research and analysis
9
-70%-60%-50%-40%-30%-20%-10%
0%10%20%
2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr
Traffic rate New York State
Schools and businesses close
Shelter in place order
-50%-40%-30%-20%-10%
0%10%20%30%
6-Mar 13-Mar 20-Mar 27-Mar 3-Apr
Brazil
Many local governments declared the state of emergency
The first social distancing measures are adopted by Federal Districts
Retail & Recreation
Transit stations Residential
-59% -68% +15%
Retail & Recreation
Transit stations
Residential
-63% -67% +14%
Retail & Recreation
Transit stations
Residential
-67% -57% +15%
The drop in countries’ mobility for recreation and transit purposes shows good compliance with government measures
-60%
-50%
-40%
-30%
-20%
-10%
0%Canada
Schools close All non-essential
businesses close
-60%-50%-40%-30%-20%-10%
0%10%20%30%
2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr
Texas
Shelter in place order
-50%-45%-40%-35%-30%-25%-20%-15%-10%-5%0%
Florida
Shelter in place order
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
2-Mar 9-Mar 16-Mar 23-Mar 30-Mar 6-Apr
California
Schools and businesses close
Shelter in place order
Retail & Recreation
Transit stations Residential
-57% -70% +15%
Retail & Recreation
Transit stations Residential
-53% -59% +16%
Retail & Recreation
Transit stations Residential
-48% -53% +14%
Managing the virusTraffic has decreased in the US, Canada and Brazil, as government restrictions imposed
-
500
1,000
1,500
2,000
2,500
05,000
10,00015,00020,00025,00030,00035,00040,00045,000
Reported new casesReported new deaths (RHS)
Key countries: US, Canada, BrazilUS may have passed peak active cases, assuming measures are not eased too much
The last step-up in preventive measures in the US came in mid/late March (varying by state), after we had seen a steep increase in the number of reported new cases per day. Reports are stating that 90% of Americans are now “sheltered at home”. Essential business continues, while many companies have reverted to remote work from home where possible. Over the last few days we have started seeing the effect of these strictest measures in the reported numbers. The number of new cases has been relatively flat since early April and has been declining over the last few days.Our forecast assumes that current preventive measures will remain in place during the forecast period. This may not be the most likely outcome as the US administration has signaled easing of measures from 4 May, but gives an indication of a spread that is currently at peak and under control. If the administration slowly eases measures they will probably maintain control.Please note there are large regional differences between each state and city.
*Assumes current measures remain in place during forecasting interval Source: Rystad Energy research and analysis; Worldometer
Daily new cases and deaths
Increasing preventive measures mid-to-late March
For further details please see our
Covid-19 dashboard at rystadenergy.com.
United States, estimated total and active true casesNumber of cases; Current measures scenario*
Reported cases 608,988 0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,00001
-Mar
04-M
ar07
-Mar
10-M
ar13
-Mar
16-M
ar19
-Mar
22-M
ar25
-Mar
28-M
ar31
-Mar
03-A
pr06
-Apr
09-A
pr12
-Apr
15-A
pr18
-Apr
21-A
pr24
-Apr
27-A
pr30
-Apr
03-M
ay06
-May
09-M
ay12
-May
15-M
ay18
-May
21-M
ay24
-May
27-M
ay30
-May
Forecast
Active true casesestimated to be around 7 million at peak
Total true cases may pass 10 million by end of MayTotal true cases today
likely around 9 million
New cases in decline
10
-
20
40
60
80
100
120
140
0200400600800
1,0001,2001,4001,6001,800
Reported new casesReported new deaths (RHS)
Key countries: US, Canada, BrazilCanada is likely about to peak – easing of measures unlikely in April
In Canada, provinces and territories enacted health and/or provincial states of emergencies beginning on 13 March in Quebec, with other provinces adding declarations over the following days. These have involved closures of all schools and public institutions/areas. Generally, non-essential businesses are closed along with other restrictions on movements and requirements for social distancing. These measures remain in place until mid-April in some cases, and until May in others. The effect on the economy has been devastating and pressure is building to relax restrictions. Our forecast assumes that current preventive measures will remain during the forecast period. The measures seem to be working and over the last few days we have seen the number of cases leveling out. The central provinces of Quebec and Ontario are seeing the bulk of the infections, with the western provinces somewhat less and the lowest numbers in the eastern provinces, generally in line with the population density of the country.
*Assumes current measures remain in place during forecasting interval Source: Rystad Energy research and analysis; Worldometer
Daily new cases and deaths
Increasing preventive measures in mid/late March
For further details please see our
Covid-19 dashboard at rystadenergy.com.
Canada, estimated total and active true casesNumber of cases; Current measures scenario*
Reported cases 26,897 0
100,000200,000300,000400,000500,000600,000700,000800,000900,000
1,000,00001
-Mar
04-M
ar07
-Mar
10-M
ar13
-Mar
16-M
ar19
-Mar
22-M
ar25
-Mar
28-M
ar31
-Mar
03-A
pr06
-Apr
09-A
pr12
-Apr
15-A
pr18
-Apr
21-A
pr24
-Apr
27-A
pr30
-Apr
03-M
ay06
-May
09-M
ay12
-May
15-M
ay18
-May
21-M
ay24
-May
27-M
ay30
-May
Forecast
Active true casesestimated to soon peak at almost 600,000
Total true cases may approach 1 million by end May
Total true cases today likely around 650,000
New cases leveling out
11
-
20
40
60
80
100
120
140
160
0
500
1,000
1,500
2,000
2,500Reported new casesReported new deaths (RHS)
Key countries: US, Canada, BrazilBrazil is seeing a strong decline in new cases – too good to be true?
In Brazil, the pandemic has triggered a variety of responses from federal, state and local governments, with an impact on politics, education and the economy. On 27 March Brazil announced a temporary ban on foreign air travelers, and most state governors have imposed quarantines to prevent the spread of the virus.Human Rights Watch has stated that President Jair Bolsonaro is putting Brazilians in grave danger by urging them not to comply with social distancing and other measures from state governments and his own Health Ministry. They also claim he has acted recklessly by disseminating misleading information about the pandemic. This provides increased uncertainty to our forecast, which assumes that current preventive measures will remain in place during the forecast period.The measures seem to be working and over the last few days we have seen a strong decline in new cases. However, as this strong decline has not been evident in any other countries we do question the numbers.Most cases are located in the state of São Paulo, followed by Rio de Janeiro.
Source: Rystad Energy research and analyses; Worldometer; *Assumes current measures in place during forecasting interval
Daily new cases and deaths
Increasing preventive measures in late March
For further details please see our
Covid-19 dashboard at rystadenergy.com.
Brazil, estimated total and active true casesNumber of cases; Current measures scenario*
Reported cases 24,232 0
100,000
200,000
300,000
400,000
500,000
600,00001
-Mar
04-M
ar07
-Mar
10-M
ar13
-Mar
16-M
ar19
-Mar
22-M
ar25
-Mar
28-M
ar31
-Mar
03-A
pr06
-Apr
09-A
pr12
-Apr
15-A
pr18
-Apr
21-A
pr24
-Apr
27-A
pr30
-Apr
03-M
ay06
-May
09-M
ay12
-May
15-M
ay18
-May
21-M
ay24
-May
27-M
ay30
-May
Forecast
Active true cases may already have peaked at close to 300,000
Total true cases may approach 500,000 by end MayTotal true cases today
likely around 450,000
New cases in strong decline
12
Executive summaryOutbreak status and outlookImpact on oil demand
• Global overview• Key country: US• Aviation
Impact on the oil and gas industryAppendix
Table of Contents
13
Global overviewGlobal oil demand drops from 100 to 72.5 million bpd in April, 90.3 million bpd for the yearGlobal oil demand impact analysis Covid-19, levels and changes vs. pre-virus estimatesThousand bpd
Source: OilMarketCube and Oil Market Weekly Analytics by Rystad Energy
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100,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0
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60,000
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100,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
The upper chart shows remaining demand for liquids after the impact of lockdowns and travel restrictions. Demand falls by 27% to 72.5 million bpd, and 90.3 million bpd for the full year, or 9.6% year-on-year.The red line shows oil demand in the alternative scenario, with a larger impact in the second half of the year. This week we see little revisions versus previous week, as only a few countries have changed lockdown status.The lower chart shows the distribution of barrels “removed from the balances”. Half of the impact is from the “Rest of World” group of regions, including LatAm, Africa, CIS, ME, SE Asia, S Asia and Australia.
East Asia Europe North America Rest of World
2019 Pre-virus Mitigation Previous
14
Global overviewRoad traffic activity last week was down across all continentsTraffic levels versus normal for last 7 daysPercent difference, year-on-year, all days
Source: Rystad Energy Global City Traffic Database; TomTom Traffic Index; Google Maps; Rystad Energy research and analysis
15
Africa
12%-24%-25%-26%-29%-29%-31%-32%-33%-36%-39%-41%-42%-47%-48%-48%-49%-52%-53%-53%-54%-56%-56%-57%-61%-61%-63%-68%-68%-68%-70%-70%-74%-75%-80%-82%-83%-90%-90%
-100% -50% 0% 50%
Guinea-BissauEgypt
GabonMadagascar
ZambiaTogo
South AfricaEthiopia
TanzaniaMozambiqueSierra Leone
MaliCote d'Ivoire
BeninBurundiSenegal
NigerAlgeria
CameroonLiberiaMalawiKenya
GambiaMauritania
LibyaMorocco
GhanaAngola
NamibiaNigeria
DR CongoCongo
ZimbabweTunisia
LesothoMauritiusRwanda
BotswanaUganda
Americas Asia & Australia Europe & Middle East
-12%
-27%
-30%
-32%
-36%
-37%
-38%
-38%
-39%
-45%
-47%
-52%
-55%
-55%
-56%
-57%
-60%
-60%
-62%
-63%
-65%
-66%
-70%
-75%
-75%
-80%
-100% -50% 0% 50%
Uruguay
Argentina
Mexico
Chile
United States
Canada
Guinea
Nicaragua
Brazil
Jamaica
Honduras
Burkina Faso
Venezuela
Panama
Paraguay
Puerto Rico
Ecuador
El Salvador
Haiti
Guatemala
Dominican Republic
Peru
Colombia
Costa Rica
Bahamas
Bolivia
-1%
-4%
-15%
-18%
-19%
-19%
-20%
-21%
-25%
-32%
-32%
-32%
-36%
-36%
-36%
-38%
-39%
-50%
-50%
-51%
-51%
-51%
-52%
-71%
-72%
-79%
-83%
-85%
-92%
-100% -50% 0% 50%
Papua New Guinea
Laos
China, Hong Kong SAR
Mongolia
China
Tajikistan
Japan
Vietnam
Cambodia
Armenia
Azerbaijan
Indonesia
Australia
Georgia
Malaysia
Kazakhstan
Uzbekistan
Singapore
Thailand
India
Kyrgyzstan
New Zealand
Pakistan
Philippines
Turkmenistan
Myanmar
Afghanistan
Sri Lanka
Bangladesh
3%2%
-3%-4%-6%
-7%-9%
-11%-15%-15%-15%-16%-17%-17%-17%-18%-18%-19%-19%-19%-21%-22%
-26%-26%-28%-28%
-29%-30%-30%-30%-31%-32%-34%-35%-36%-37%-38%-38%-39%-39%-40%-42%-46%-47%-48%-48%-50%-51%-52%-53%-54%-56%-57%-58%-70%
-100% -50% 0% 50%Bulgaria
Faeroe IslandsSlovakia
Czech RepublicLiechtenstein
BelarusHungary
DenmarkBosnia and Herzegovina
LatviaQatar
NetherlandsIceland
SwedenOman
CroatiaGermany
FinlandSloveniaLithuania
UkrainePoland
PalestineKuwait
EstoniaRomania
Saudi ArabiaNorway
SpainSwitzerland
MoldovaAustria
UAETurkey
BahrainRussiaSerbia
GreecePortugalBelgium
MontenegroIranItaly
LebanonSan Marino
IsraelFrance
LuxembourgJordanCyprus
United KingdomAlbaniaIreland
AndorraIraq
Global overview Demand for road fuel is down by 16.3 million bpd in April, while jet fuel is down 65%Global oil demand impact analysis Covid-19, levels and changes vs. pre-virus estimates Thousand bpd
Road fuel and jet fuel make up about 50% of total liquids. The remainder is NGLs, heavy distillates, marine bunker, lube oils, asphalt and coke.The amount “removed from the balances” totals about 3.6 billion barrels for the full year, of which 3.2 billion barrels are crude-based fuels, while the rest is NGLs and biofuels.There is not enough storage to absorb this unprecedented oversupply, so something has to yield: Refineries first, then production from Opec+ and finally other producers, as the oil price falls below the marginal cost of production.Read more about the impact on the oil market in the next section, and even more in our Oil Market Weekly Analytics.
Source: Oil Market Cube and Oil Market Weekly Analytics by Rystad Energy
0
20,000
40,000
60,000
80,000
100,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0
20,000
40,000
60,000
80,000
100,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec-30,000
-25,000
-20,000
-15,000
-10,000
-5,000
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Road fuels Jet fuels Other fuels
2019 Mitigation Previous
Pre-virus
16
Source: IATA, ICAO, OAG, Rystad Energy research and analysis
17
China, -42.6%
Japan, -40.1%
South Korea, -60.4%
Hong Kong, -94.2%
India, -53.2%
Germany, -92.5%
Spain, -94.2%
UK, -91.0%
Italy, -92.2%
France, -92.1%
UAE, -78.2%
Singapore, -92.5%
Australia, -84.6%
US, -58.0%
-100.0%
-90.0%
-80.0%
-70.0%
-60.0%
-50.0%
-40.0%
-30.0%
-20.0%
-10.0%
0.0%0 1 2 3 4 5 6 7 8 9 10 11 12
Scheduled flight changes year-on-year after 500 reported cases
As we approach week 12 since reaching 500 reported cases in China, year-on-year scheduled flight changes are stabilizing at around a 40% reduction.
Only two weeks after 500 cases were reported in Hong Kong, Singapore and the UAE, scheduled flight changes reached reductions of about 85%, suggesting very strict travel restrictions.
European countries took five weeks to reach similar levels, and flight reductions are set to stabilize at about 90% for the coming weeks.
Flight activity in the US has been more resilient, and currently lies at about 50% down from last year.
AviationTravel restrictions in Europe force nine out of ten flights to stay on the ground
Aviation Global demand for jet fuel is down by 65% year-on-year in April and MayGlobal oil demand impact analysis Covid-19, levels and changes vs. pre-virus estimates Thousand bpd
Source: Oil Market Cube and Oil Market Weekly Analytics by Rystad Energy
01,0002,0003,0004,0005,0006,0007,0008,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0
1,0002,0003,0004,0005,0006,0007,0008,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
-5,500
-4,500
-3,500
-2,500
-1,500
-500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec-5,500
-4,500
-3,500
-2,500
-1,500
-500
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Jet fuel demand has fallen dramatically, from 7 million bpd to only 2.5 million bpd in April and May.Due to excessive supply from refineries, jet fuel – a rather flexible middle distillate – is now being used for other purposes and reprocessed to gasoline for storage.
East Asia Europe North America Rest of World
2019 Pre-virus Mitigation Previous
18
Executive summaryOutbreak status and outlookImpact on oil demandImpact on the oil and gas industry
• Global market outlook• Market segment focus
Appendix
Table of Contents
19
Global market outlookFor 2020 we now see a y/y GDP contraction of 2.6%, “other fuels” demand decrease of 2.9%
Assumed GDP impact by country, monthly and for the year 2020
Source: Rystad Energy, Brookings https://www.brookings.edu/research/the-global-macroeconomic-impacts-of-covid-19-seven-scenarios/
20
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
1 2 3 4 5 6 7 8 9 10 11 12
Italy Russia Other Opec/ME Saudi Arabia France India Rest of Eurozone Germany United Kingdom Brazil South Africa Mexico Argentina Turkey Indonesia Canada United States Australia China Japan South Korea RoW Rest of OECD Rest of Asia Iran Spain
-20.0% -15.0% -10.0% -5.0% 0.0%
IranSaudi ArabiaOther Opec/MERussiaMexicoBrazilCanadaItalySpainRoWIndonesiaTurkeySouth AfricaIndiaArgentinaFranceUnited KingdomJapanUnited StatesRest of EurozoneGermanyAustraliaChinaSouth KoreaRest of OECDRest of AsiaWorld
2020 GDP impact assumed for other fuels demand
EP LER
2019 (-2.9%)
Staring into the 21 millon bpd oversupply for 2Q20, the 10 million bpd cut OPEC+ has agred to is not sufficient to avoid further downwards pressure in spot prices. However, it would give the market more time to prepare for a situation where oil storage capacity becomes depleted, thus forcing large uncontrolled production shut-ins during May. In fact, our model indicates that the cut could delay the reckoning until July, a time when global oil demand is expected to be much stronger if the world manages to control the Covid-19 spread..
This will help global E&Ps better prepare and support oil prices –although, even in this scenario, we believe crude prices will still fall from the $33 Brent price seen today.
We find that a double-digit immediate supply cut will delay the market from “hitting a wall” by 2 months or more. This would allow more time for demand to improve, for companies to prepare supply chains and activity plans, to reduce costs and to avoid an uncontrolled dismantling of parts of the industry. This would only come back to haunt the market with risk of price spikes 18-24 months down the line.
Crude and condensate balancing scenario in “10 million bpd cut scenario” (Day 0 = 31 March 2020)Storage or capacity (Million barrels) Runs or crude supply (Million barrels per day)
30
40
50
60
70
80
90
-800
-600
-400
-200
0
200
400
0 3 6 9 12 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 66 69 72 75 78 81 84 87 90
Remaining crude storage capacity (inversed)Remaining gasoline storage capacityFloating storage (crude)Crude runs (demand)Crude supply (10 mmbpd cut)
Global market outlookA 10 million bpd supply cut is not enough, but will delay oil market chaos until July
Source: Rystad Energy Oil Market Weekly, OilMarketCube
Days0 = 31 March 2020
Onshore storage exhausted in July
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