0643 GMT October 31, 2020
In 2019, the world consumed 99.7 million barrels per day (mbd) of crude oil — and OPEC was forecasting a rise to 101mbd in 2020, shana.ir reported.
But in the year, the coronavirus crisis triggered a long-anticipated tipping point in the oil demand by quenching global thirst for fossil fuels.
Global lockdowns this year that grounded planes and took traffic off the streets, prompted OPEC to slash the 2020 figure to 91mbd, with 2021 demand still seen below 2019 levels.
Downward revisions to demand forecasts are prompted by the rise of electric vehicles and a shift to renewable energy sources as the pandemic has driven down crude consumption by as much as a third in 2020.
OPEC has been scaling back expectations. In 2007, it forecast world demand would hit 118mbd in 2030. By last year, its 2030 forecast had dropped to 108.3mbd, according to Reuters.
In the meantime, Exxon Mobil Corp. posted a quarterly loss for the second straight quarter for the first time this century on July 31, reporting a loss of $1.1 billion, compared with a profit of $3.1 billion a year ago, Wall Street Journal reported. Exxon, the largest US oil company, hadn’t reported back-to-back losses for at least 22 years, according to Dow Jones Market Data, whose figures extend to 1998.
Licking its wounds, Chevron Corp. said on Friday it lost $8.3 billion in the second quarter, down from $4.3 billion in profits during the same period last year, its largest loss since at least 1998. It wrote down $5.7 billion in oil-and-gas properties, including $2.6 billion in Venezuela. Chevron also said it lowered its internal estimates for future commodity prices, WSJ reported.
Moreover, the historic price slump in the oil market which sent oil below $16 a barrel and brought US oil to below zero for the first time in history in April, was caused by slashed demand in the wake of the deadly coronavirus pandemic which has claimed the lives of at least 679,000 worldwide since it broke out late last year.
Now OPEC officials wonder whether all this would herald a lasting shift in consumption habits if oil peak has been put behind and the age of oil is drawing to a close.
An industry source close to OPEC, who preferred to remain anonymous, said key players were beginning to appreciate a new reality in the industry that consumption might be hard to recover, but were also preparing the organization to play its role as a market leader in such hard times to save participants as before.
OPEC is no stranger to difficult times. It did save the industry back in the 80s and 90s and the 2000s. However, things were different at those times. The bloc would undergo internal clashes and infighting to save the market and keep shares in the market. But this time, as it turns out, it has acted more refined than ever to attract the support of not only members unanimously to save the market, but also non-members including major producers like Russia.
Just to remember, oil was traded above $145/barrel back in 2008 amid soaring demand.
Major producers including OPEC, which includes Saudi Arabia, Russia and the US, among many others, now have to find a way to hammer out strategies to weather falling prices in the coming months, and ensure revenue generation as consumption seems to have entered a long-term decline with aviation falling dramatically and motorists staying home in fear of contracting the virus.
For its part, OPEC, whose members sit on 80 percent of the world’s proven oil reserves, has put behind its classic infighting in favor of winning more market share and saving prices by joining long-time market rivals like Russia in a bid to dilute the supply glut in a market awash with costly shell supplies from US producers.
As a result, OPEC with Russia and other allies, a grouping known as OPEC+, agreed record output cuts of 9.7mbd, the equivalent of 10 percent of global supplies. Those deep cuts run to the end of July.
Despite losing the lion’s share of the global oil market to non-members, OPEC’s role to steer the market and prevent falling prices is more crucial than ever as the 13-memebr group has brought together 10 non-members including Russia for the first time in the industry’s history to close ranks to tackle a dwindling industry.