Adedapo Adesanya
By Adedapo Adesanya
April is set to be the worst month for oil in over 20 years as crude demand will drop by more than 20 million barrels per day throughout this month.
The month has since been tagged as Black April by forecasters and backed up by projections from both the Organisation of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA).
Crude has faced one of the biggest pressures in history this year – a global pandemic and an oil price war – and is now headed for the one of the greatest demand shocks on record further complicated by a growing glut.
OPEC in its monthly report released on Thursday said demand for oil would drop to 20 million barrels per day in April, the least amount of crude oil the group has pumped since 1989, which is about one-fifth of previous demand.
The oil market is currently undergoing historic shock and it might not recover till the second half the year as the cartel forecast that global oil demand would fall by over six million barrels per day in the first half of this year.
Over the weekend, OPEC and its allies agreed massive production cut amounting to 10 percent of global supplies, but surprisingly, this has not helped prices as nations have extended lockdown following increases in number of COVID-19 cases which is above two million worldwide.
While OPEC sees world oil demand contracting by 6.8 million barrels a day in 2020, another energy related organisation, the Paris-based IEA, on Wednesday projected a slump of just over 9 million barrels per day.
While OPEC sees April being hit with a drop of about 20 million barrel per day, IEA sees the month tumbling by 29 million barrels a day to its lowest since 1995.
According to the IEA, the OPEC+ deal, along with production losses elsewhere due to low prices and by the Group of 20 nations, will only limit the damage because the remaining surplus is so massive that it could overwhelm ships, pipelines and storage tanks in the coming weeks.
Prices will as a result come under further downward pressure in the coming days and weeks, the IEA noted and this has reflected in prices which are currently at $20 – $30 per barrel levels.
