Global oil demand is freefalling towards record annual drop

Remote working and travel restrictions are all weighing on demand

Global oil demand is freefalling towards record annual drop
Steve Randall

The continued spread of the COVID-19 virus and the global response to try to mitigate the impact are weighing heavily on the global oil market.

With employees increasingly opting to work from home - or employers or authorities insisting on it – and travel restrictions growing worldwide, demand for oil is tumbling.

It means a sharp revision of the outlook for the industry by hedge funds, traders, and the energy industry; and comes at a time when Canada’s oil producers should have been set for rosier times ahead.

“This global pandemic is something the world hasn’t witnessed since 1918,” Pierre Andurand, who runs oil hedge fund Andurand Capital Management LLP told Bloomberg. “I do not see how the demand drop wouldn’t be multiples of the drop witnessed during the global financial crisis.”

In 2019, oil demand was running at more than 100 million barrels a day but experts are now weighing a drop in demand greater than the 1 million a day seen during the peak of the financial crisis. Goldman Sachs says it could be 4 million per day every month from February to April.

But others believe it could be even worse.

Canadian oilsands

The slump in demand and significant drop in prices will, of course, have an impact on Canadian oil producers with a knock-on effect for the oil-producing provinces’ economies.

RBC Economics updated its outlook Friday and noted that while the impact of COVID-19 and plummeting oil prices will affect the Canadian economy overall, a more sustained price war between Russia and Saudi Arabia will mean a more prolonged period of pain for the oil-producing provinces.