The International Energy Agency said Tuesday that global oil demand is unlikely to return to pre-pandemic levels for at least another two years, following the biggest downturn in oil market history.
The Paris-based group said factory, aviation and secondary business shutdowns linked to the outbreak have slashed world demand by a record 8.1 million barrels per day this year, while supplies are being held down by two recent OPEC production cut agreements, which are taking nearly 10 million barrels from the market each day. U.S. stockpiles, the Agency noted, are also sitting at record highs as unwanted crude sits idle in storage facilities throughout the country.
"While the oil market remains fragile, the recent modest recovery in prices suggests that the first half of 2020 is ending on a more optimistic note," the IEA said.
"In sporting terms, the 2020 oil market is now close to the half time mark. So far, initiatives in the form of the OPEC+ agreement and the meeting of G20 energy ministers have made a major contribution to restoring stability to the market," the Agency added. "If recent trends in production are maintained and demand does recover, the market will be on a more stable footing by the end of the second half."
"However we should not underestimate the enormous uncertainties," the report cautioned.
Front-month WTI futures contracts for July delivery, the benchmark for U.S. prices, were last seen $.125 higher from their Monday close in New York and changing hands at $38.37 per barrel, a move that takes their two-month gain to around 94%.
Brent futures for August delivery, which benchmark around 60% of global crude purchases, gained $1.9 to trade at a $41.01 per barrel.
The IEA also noted what it called an 'existential crisis' for the global airline industry, which is looking at levels of activity that are some 70% lower than last year as travel restrictions and lockdown orders keep planes on the ground in major economies around the world.
"The industry will continue to be a drag on oil demand through 2021, with our first estimate showing that, having fallen by 3 million barrels per day in 2020, jet/kerosene demand will rebound by only 1 million barrels per day in 2021, leaving it below the pre-crisis level," the report noted.
Earlier this month, OPEC cartel leaders and non-member allies agreed to extend their record production cut agreement through to the end of July.
The so-called OPEC+ agreement, which includes members of the price-setting cartel along with Russia and Mexico, following a virtual meeting Saturday, will see 9.6 million barrels of oil -- around 10% of global output -- held back from the market each day until then end of next month.
From the end of July until December, the cartel previous agreed to ease that production cut level to around 7.7 million barrels per day.