LONDON — The International Energy Agency on Tuesday cut its forecast for 2020 oil demand growth, citing a "treacherous" path ahead amid weakening market sentiment and an upsurge in the number of coronavirus cases reported across the globe.
In a closely-watched monthly report, the IEA trimmed its outlook for worldwide oil demand to 91.7 million barrels per day. That marks a contraction of 8.4 million bpd year-on-year, more than the 8.1 million bpd contraction predicted in the Paris-based energy agency's August report.
"We expect the recovery in oil demand to decelerate markedly in the second half of 2020, with most of the easy gains already achieved," the IEA said.
"The economic slowdown will take months to reverse completely, while certain sectors such as aviation are unlikely to return to their pre-pandemic levels of consumption even next year."
International benchmark Brent crude traded at $40.21 a barrel on Tuesday morning, up around 1.5%, while U.S. West Texas Intermediate crude (WTI) stood at $37.90, roughly 1.7% higher.
Oil prices have dropped around 40% since the start of the year.
"I think the main message that we put across in the report is that sentiment seems to be weakening," Neil Atkinson, head of the oil industry and markets division at IEA, told CNBC's "Street Signs Europe" on Tuesday.
"We have seen oil prices very, very range-bound since roughly the middle to the later part of June, between $40 and $45 a barrel for Brent. But, just recently we have seen $40 a barrel tested and it does look as if the rebound in recovery is beginning to stall."
Atkinson said the upsurge of coronavirus cases across Europe, in particular, reflected "a cause for concern," before adding: "It does look as if we are not out of the woods yet."
Renewed weakness
The report comes shortly after OPEC cut its forecast for oil demand growth in 2020, citing a weaker-than-expected recovery in India and other Asian countries. The oil-producing group also warned on Monday that risks would remain "elevated and skewed to the downside" for the first half of 2021.
The IEA echoed this sentiment on Tuesday, saying "renewed weakness" in India reflected a cause for concern. However, China, which emerged from lockdown sooner than other major economies, continued to recover "strongly," the group said.
Energy market participants have become increasingly anxious about a faltering economic recovery and stumbling fuel demand in the wake of the coronavirus pandemic.
The global health crisis has coincided with an unparalleled energy demand shock this year, with the IEA previously warning the fall in oil demand growth in 2020 could be the largest in history.
Looking ahead, the IEA said it expected worldwide oil demand to grow by around 5.5 million bpd next year, climbing to an average of 97.1 million bpd in 2021.
To date, more than 29.2 million people have contracted Covid-19 worldwide, with 928,576 related deaths, according to data compiled by Johns Hopkins University.
Correction: This story has been updated to reflect that the IEA's global oil demand forecast for 2020 was 91.7 million barrels per day in its September Oil Market Report.