The oil market may be stabilizing as producers, including the U.S., cut back on their crude output.
  • The International Energy Agency eased its grim demand projections amid a gradual reopening of some economies.
  • The oil market may be stabilizing as oil producers, including the U.S. cut back on their crude output. 
  • Global crude supply is set to fall to a nine-year low, says the agency potentially cementing carbon emissions reductions.

The global appetite for oil has been battered by an economic downturn brought on by the COVID-19 pandemic but the reopening of some economies led the International Energy Agency to ease its grim demand projections, even as the U.S. helps cut back global oil production to multiyear lows — a move that could also help keep carbon emissions down.

Consumer demand for oil is still set to fall this year by “the largest amount in history,” said the Paris-based agency in its monthly oil market report.

Still, the gradual reopening of some countries such as New Zealand, following COVID-19 lockdowns, caused the agency to soften its dire outlook. Global oil consumption is expected to fall by 8.6 million barrels per day in 2020, slightly less than the agency’s April estimate of a 9.3 million barrels per day reduction.

Faith Birol, the IEA’s executive director, called April a “black” month, as oil prices plunged to negative territory for the first time ever amid anemic demand and a surplus of crude in the market. 

Oil prices remain about 50% below their value late last year, but they inched up to hover around $25 per barrel on Thursday, on the promise of steep supply cuts from the Organization of the Petroleum Exporting Countries and external producers including Russia that agreed to cut global crude output last month.

Other producers are also choking back on crude production. Global crude flows are set to fall by a “spectacular” 12 million barrels per day in May to a nine-year low of 88 million barrels per day, said the agency in its report. Along with weak demand, less oil output could help cement a reduction in greenhouse gases linked to climate change. The IEA says carbon dioxide emissions are expected to fall to levels last seen a decade ago.

By the end of the year, the U.S. will have contributed to the largest production cut surpassing the cuts by Saudi Arabia, said the agency. The moves could sustain a fragile stabilization of the crude market, say experts.

“We hope to see black April behind us and we are expecting a gradual rebalancing of oil markets,” Birol told Karma during a press conference. Although, he noted that COVID-19 could still derail all the agency’s projections. “Of course, huge uncertainties remain.”