Consulting firm IHS Markit expects oil demand in the second quarter of 2020 to be 22 million barrels per day less than a year ago.
This collapse in demand combined with low oil prices, storage constraints and government ordered cuts are driving what is an extraordinary level of liquids production cuts and shut-ins around the world.
“The Great Shut-In, a rapid and brutal adjustment of global oil supply to a lower level of demand is underway. All producing countries are subject to the same brutal market forces. Some will be impacted more than others. But there is nowhere to hide,” said Jim Burkhard, vice president and head of oil markets at IHS Markit, World Oil reported.
North America and OPEC members, as well as countries in the Commonwealth of Independent States—particularly Russia—are expected to be the source of most of the production cuts.
Exactly where, why and how supply cuts will take place is a complex matter. There is no fixed equation. Oil is produced in a wide variety of environments, which means there is no fixed equation and decision factors vary.
“When it comes to the where, why and how of production cuts, the wide range of technical, logistical, regulatory, contractual, and financial conditions means there is no single set of answers. But under these market conditions, it is pretty clear where production will be cut. Nearly everywhere,” said Paul Markwell, vice president, global upstream oil and gas at IHS Markit.