Economic Report 2020

The evolving role of the oil and gas industry

Oil market dynamics The oil market has seen unprecedented volatility throughout 2020, the direct result of a collapse in demand due to the restrictions put in place to manage the spread of COVID-19. This has led some commentators to suggest that the pandemic-related restrictions, combined with the wider adoption of net zero objectives, will mean that 2019 represents the peak level of oil demand at global level. Globally, the IEA estimates that oil demand (including biofuels) in 2020 will fall to 91.3 million barrels per day (bpd), down 8.4 million bpd on 2019 levels. 23 This is three times greater than the previous largest year-on-year decline rate seen in 1980. Demand in April, at the height of the global restrictions, saw a reduction of 29 million

bpd, falling to the lowest monthly level since 1995. 24 A shift in demand of this extent has never been seen before, outlining just how severe the impact of the pandemic and subsequent global economic downturns have been on the industry. This significant fall in demand in 2020 driven by COVID-19 restrictions has had a significant impact on the Brent crude price. In March, the Brent spot price fell by more than 80 per cent as the increasing impact of COVID-19 became apparent and hit investor and consumer confidence levels. A similar scale of percentage decline was seen during the previous downturn, albeit more gradually over a period of 18 months from mid-2014 to early 2016.

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Monthly Average Brent Spot Price

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Nominal Average Monthly Brent Price Annual Average Brent Price

100

80

60

Brent Price ($ per Barrel)

40

20

0

Jul-13

Jul-14

Jul-15

Jul-16

Jul-17

Jul-18

Jul-19

Jul-20

Jan-13

Jan-14

Jan-15

Jan-16

Jan-17

Jan-18

Jan-19

Jan-20

Oct-13

Oct-14

Oct-15

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Oct-17

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Oct-19

Oct-20

Apr-13

Apr-14

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Apr-20

Source:EIA

23 https://www.iea.org/reports/oil-market-report-october-2020 24 https://www.iea.org/reports/oil-market-report-april-2020

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