Global oil prices have fallen in line with growing concern over the transmission of the coronavirus and its impact on the economy - Photo by OPEC Secretariat Office

JAKARTA (TheInsiderStories) – Global oil prices have fallen in line with growing concern over the transmission of the coronavirus and its impact on the economy. Oil prices have fallen about 23 percent throughout 2020 because the pandemic caused is predicted to reduce the fuel demand.

On Thursday (02/27) the price of West Texas Index fell 3.37 percent to US$47.09 a barrel for April delivery contract. Brent oil prices also closed down 2.34 percent $52.18 per barrel for April delivery. Both prices declined in five consecutive sessions.

Now, the market is waiting for the Organization of the Petroleum Exporting Countries (OPEC) and its allies to cut production in anticipation of slowing demand. The meeting of OPEC+ is planned to be held next week in Vienna, Austria.

So far, Saudi Aramco had cut its supplied to 500,000 barrels of oil per day (bpd) to China, below the normal level. While, Russia has refused Saudi Arabia’ invitation to participate in the OPEC step.

On Jan. 30 announcement, OPEC members are considering holding an emergency meeting in February after oil prices slumped on concern the spread of coronavirus. Based the initial plan, the organization and its allies are set to meet on March 5 – 6 to discuss the future of oil production that expire at the end of March.

In the last meeting, OPEC and its allies has recalling the ‘Declaration of Cooperation’ (DoC) reached on Dec. 10, 2016. Reaffirming the continued commitment of the participating producing countries in the DoC to a stable market.

The 7th OPEC and non-OPEC Ministerial Meeting decided for an additional adjustment of 500,000 barrels per day (bpd). These lead to total adjustments of 1.7 million barrels a day (mb/d). In addition, several participating countries, mainly Saudi Arabia, continued their additional voluntary contributions, leading to adjustments of more than 2.1 mb/d starting Jan. 1, 2020.

The organization currently produces 29.7 mb/d or about 30 percent of global output, which is 2.6 mb/d fewer than a year ago. OPEC sees oil demand is forecast to reach 110.6 mb/d by 2040.

The non-OECD drives oil demand with growth of 21.4 mb/d by 2040 compared to 2018, whereas the OECD region is expected to contract by 9.6 mb/d. Long-term demand growth comes mainly from the petrochemicals (4.1 mb/d), road transportation (2.9 mb/d) and aviation (2.4 mb/d) sectors.

The total vehicle fleet – including passenger and commercial vehicles – is estimated to grow by more than 1 billion by 2040 to around 2.4 billion.

The long-term share of electric vehicles in the total fleet is projected to reach a level of around 13 percent in 2040, supported by falling battery costs and policy support, but the majority of the growth continues to be for conventional vehicles.

In addition, non-OPEC liquids supply is projected to grow by 9.9 mb/d between 2018 and 2024, the majority coming from US tight oil, but from the mid-2020s non-OPEC sees a steady decline. Demand for OPEC liquids is projected to increase to around 44.4 mb/d in 2040, up from 36.6 mb/d in 2018.

Crude distillation capacity additions of around 8 mb/d are expected between 2019 and 2024, with over 70 percent in the Asia – Pacific and the Middle East. This is close to 50 percent of the total capacity additions required in the long-term to 2040.

Global crude oil and condensate trade is estimated to remain relatively static at around 38 mb/d between 2018 and 2025, before increasing to around 42 mb/d by 2040.  The United States and Canada is expected to increase crude and condensate exports in the medium-term.

Over the entire forecast period, the major oil trade route remains the Middle East to the Asia-Pacific. The organization also predicted, in the period to 2040, the required global oil sector investment is estimated at $10.6 trillion.

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