The International Energy Agency (IEA) believes that the global oil markets would experience a sharp fall in demand in 2020, but it cut its forecast of the drop on the back of the easing of lockdown measures.
World oil production is heading for a historic drop this month to reach a nine-year low, the IEA said in its monthly report released Thursday.
OPEC and its allies have begun implementing a historic agreement to cut oil production levels by about 9.7 million barrels per day (bpd) over the next two months, and other producers, such as the United States, are forced to cut drilling.
The Paris-based agency explained that market forces had proven strong on the supply side and showed that the pain of lower prices was affecting all producers.
"We are seeing significant reductions in production from countries outside the OPEC+ agreement faster than expected."
This is a stark turnaround from last month, when energy agency chief Fatih Birol called last month "Black April" when the agency warned that OPEC+ cuts might not have been enough to prevent global storage tanks from filling in by the middle of the year.
On the demand side, the Energy Agency raised its estimate of global oil demand for the second quarter by 3.2 million barrels per day to 79.3 million barrels per day.
For the whole year of 2020, the agency raised demand estimates by about 700,000 barrels per day, but still pointed to at an annual decline of 8.6 million barrels per day, or about 9 percent, to 91.2 million barrels per day.
In terms of oil supply, the IEA expects oil supplies to decline by about 12 million barrels per day, or about 12 percent, this month, compared to April, amid significant production cuts by the Saudi-led alliance of producers.
However, the Energy Agency acknowledged the uncertainty about the outlook, as it is unclear whether governments can resume economic activity without causing a renewed outbreak of the Coved-19 pandemic.
The IEA stressed that the resurgence of Covid-19 cases would be a major risk factor for oil demand.
A press time,