Organizationof thePetroleumExportingCountries 17 June 2020 Feature article: World oil market prospects for the second half of 2020 Oil market highlights Feature article Crude oil price movements Commodity markets World economy World oil demand World oil supply Product markets and refinery operations Tanker market Crude and refined products trade Commercial stock movements Balance of supply and demand i iii 1 7 10 24 31 46 52 55 60 65 65 OPEC bulletin 6–7/20 World oil market prospects for the second half of 2020 June 2020 Following an unprecedented and highly turbulent 1H20 due to the enormous impact of COVID-19 on the global economy and oil market fundamentals, the dust is start- ing to settle as actual data becomes available for a better and clearer assessment of the damage incurred, and the likely road to recovery. Available 1Q20 and 2Q20 economic data shows that themajor declines inoutputweremostly due to the severe lockdown measures across the globe. A gradual recovery is forecast as soon as these measures are lifted, which is already taking place in some economies. Consequentially, this is anticipated to have a considerable positive impact on 2H20 growth. The expected rebound will be accompa- nied and further supported by unprecedented fiscal and monetary stimulus that potentially amounts to around 25 per cent of global GDP. However, the hospitality and leisure sectors, including travel, will remain significantly impaired. Default rates are expected to rise in 2H20 and unemployment is forecast to remain high. Hence, while a recovery is expected to provide some relief to the on- going downturn, it will not be able to compensate for the significant decline seen in the first half of the year. The anticipated recovery of the oil sector, supported by the efforts of OPEC and non-OPEC oil-producing nations un- der the ‘Declaration of Cooperation’ (DoC), will make a further contribution to oil market stabilization and hence global economic development. Indeed, themarket has re- acted positively to the decisions taken at the 179 th OPEC Conference and the 11 th OPEC and non-OPEC Ministerial Meeting, held on June 6, 2020, to extend the first phase of the production adjustments pertaining inMay and June by one further month. Global growth in 1Q20 is forecast to decline by three per cent y-o-y and 2Q20 is estimated to drop by ten per cent y-o-y, before seeing a recovery in 2H20, leading to almost normal GDP growth levels in 4Q20of around three per cent. For 2020, global economic growth is forecast to decline by 3.4 per cent in 2020. World oil demand is anticipated to decline by 6.4mil- lionbarrels/day in2H20comparedwithadecline of 11.9m b/din1H20,withagradualrecoveryprojecteduntiltheend of 2020. Transportation fuels are forecast to remain un- der pressure in 2H20, despite ongoing easing in lockdown measures.Aviationfuelisexpected to continue facing challenges, as national and international flights are anticipated to only slowly recover, while teleworking/tel- econferencing restricting busi- ness travel. Gasoline consump- tionwill alsobe restraineddue to high unemployment in the US and reduced commuting. In addition, industrial fuels continue impactedbyglobal weakness in manufactur- ing activities. Overall, oil demand in all regions is forecast to contract by 6.4m b/d in 2H20, mostly in OECD Americas and Europe. Non-OPEC oil supply in 2H20 is forecast to decrease by 4.3m b/d, compared to 1H20, and drop by 6.1m b/d compared with 2H19. Non-OPEC supply growth in 1H20 is estimated to have slowed by 1.8m b/d compared with 2H19, due to production outages of 5.1m b/d in 2Q20. These outages are not only due to production adjust- ments agreed by the non-OPEC countries participating in the DoC, but also due to production curtailments by North American producers and, to some extent, in Brazil and Norway. Production outages are expected to extend into 2H20, with the largest declines expected in the US and Canada by a combined 2.8m b/d, while output of the ten non-OPEC participants in the DoC is forecast to drop by 1.7m b/d. The unexpected and unprecedented impact of the COVID-19pandemic on theworldoilmarket has prompted countries participating in the DoC to take historic action to mitigate the disastrous impact of the unparalleled oil demanddestructionandensuing oil supply glut. Given the largeuncertainty in themarket, the substantial production adjustments, which are now subject to constant monitor- ing with regular monthly meetings of the JMMC in 2H20, were extended to July during the 179 th OPEC Ministerial Conference and the 11 th OPEC and non-OPEC Ministerial Conference on June 6, 2020. M a r k e t R e v i e w