Coronavirus to Keep Oil Below $60 for First Half of 2020 - US EIA Chief

WASHINGTON (Pakistan Point News / Sputnik - 12th February, 2020) Oil is expected to remain below $60 per barrel until the end of June at least due to the coronavirus crisis despite supply outages that should logically boost prices, the head of the US Energy Information Administration (EIA) said on Tuesday.

"EIA expects that travel restrictions in response to the coronavirus, along with the related economic slowdown in China, will reduce petroleum demand and keep crude oil prices below $60 per barrel through the first half of this year despite current disruptions to crude oil supply," EIA Administrator Linda Capuano said in the agency's February 2020 Short-Term Energy Outlook (STEO).

In Tuesday's market, Brent, the global benchmark for crude, hovered at $54 per barrel, up about 1.5 percent on the day, but down nearly 25 percent from its early January high of above $75.

In its last STEO published on January 14, before the coronavirus became as worrying a pandemic as now, the EIA had predicted that Brent will average $65 per barrel this year, slightly higher the 2019 average. But even then, the agency said "downward oil price pressures could emerge in the coming months" though it expected geopolitical risks to limit price drops.

The EIA also announced on Tuesday that it expected global demand for petroleum and liquid fuels to grow by 1.0 million barrels per day in 2020, or down 30 percent from the growth of 1.3 million barrels per day it projected in its January STEO.

"Changes in the forecast mostly result from the coronavirus and its effects on oil consumption in China," Capuano said, referring to the world's largest energy buyer.

Oil major BP has warned that the coronavirus outbreak could cut global oil demand by 300,000-500,000 barrels a day on average this year, largely to the effects of the pandemic in China, where entire cities and industries remain under lockdown amid the deaths of more than 1,000 people and infections of more than 42,000 from the virus.

Despite falling global demand, Capuano said US oil production is expected to continue growing this year, continuing the trend of record highs established since 2014 due to the hydraulic fracturing boom that has made the United States the world's largest producer of crude.

"The current outlook for US crude oil production reflects slowing growth, with production expected to average 13.2 million barrels per day in 2020, up 8 percent from 2019, and 13.6 million barrels per day in 2021, a 3 percent increase from 2020," the EIA head said.

Capuano also said she expected global inventories to build by 600,000 barrels per day in the first half of this year because of slow demand growth and strong supply growth from countries outside the Organization of the Petroleum Exporting Countries (OPEC). The United States is among producers that aren't members of OPEC, an organization dedicated to boosting oil prices via production cuts.