Crude oil demand this year will fall to around 90.6 million bpd this year, OPEC’s secretary-general Mohammed Barkindo said ahead of the next OPEC+ meeting, as cited by Trend.

This level of demand was last seen before 2014, when the oil market again swung into an oversupply and prices tanked as the Gulf producers fought U.S. shale.

“World oil demand growth in 2020 is expected to drop by a staggering 9.07 mb/d, with the worst impact seen in this quarter. We expect demand for the year to be around 90.59 mb/d – back to levels last seen before the 2014-2016 market downturn,” the top official said.

This is not good news because oil in storage remains high, according to the latest data from analytics firm OilX. Oil in floating storage has begun to be drained, OilX said, but oil in onshore storage was still rising in May. To date, total oil in onshore storage is above 4.5 billion barrels. Of this, some 1 billion barrels flowed into storage in the past couple of months and will take a lot longer to clear up.

The drawdown in oil stocks may accelerate as economies recover from the Covid-19 crisis, but since OPEC+ will tomorrow be discussing a one-month extension of its deepest production cuts, the sentiment in the cartel seems to be still largely bearish. However, Russia may be more optimistic: Energy Minister Alexander Novak said earlier this week that he expected the oil market to swing into a shortage in July.

Whatever happens, the effect of the crisis has already been devastating for the industry. Barkindo noted that investment in oil and gas could fall by as much as 23 percent this year from last, to about 50 percent of the record-high $741 billion invested in 2014. There will be bankruptcies and layoffs in what the official called a repeat of the 2014-2016 scenario.

By Irina Slav for Oilprice.com

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