Global oil supply tumbled by 820,000 barrels per day (bpd) in January to stand at 100.51 million bpd, according to the International Energy Agency’s (IEA) report on Thursday.
The decline is due to lower oil demand as the coronavirus outbreak in China has hampered the Chinese economy and hindered oil demand in the country and in Asia in general, according to the IEA's monthly oil report.
Demand is now expected to fall by 435,000 bpd in the first quarter of 2020, from the same period of last year, to mark the first quarterly contraction in more than 10 years, the report said.
Oil demand in China, the world's second largest oil consumer, will also be reduced by lower economic activity, the IEA said.
"The quarantine of Wuhan, subsequently extended to other cities in Hubei, has affected 60 million people producing 4.5% of China’s GDP ... Therefore, if consumption falls by 10%, GDP growth would fall by 1.1% point," the report said.
- OPEC output down
The IEA stated that the Organization of Petroleum Exporting Countries' (OPEC) crude oil production in January fell by 710,000 bpd to 28.86 million bpd, as Libya struggles with shutdowns in oil fields and ports.
"A blockade in Libya slashed production and the United Arab Emirates saw output fall by 300,000 bpd," the report said.
OPEC and non-OPEC oil producing countries, dubbed as OPEC+, agreed on Dec. 6, 2019 to curb their total output by 0.5 million bpd, on top of the already existing production cut of 1.2 million bpd, which would bring their total cut to 1.7 million bpd until the end of June 2020.
However, this may not be sufficient enough to bring a balance to the global oil market as worldwide oil demand is expected to remain low in the first half of 2020 due to coronavirus.
The IEA said OPEC+ countries would consider an additional cut of 0.6 million bpd in production in their meeting next month in Vienna, Austria as an "emergency measure" on top of the 1.7 million bpd that has been already pledged.
By Ovunc Kutlu