International benchmark Brent crude futures traded at $40.51 on Tuesday morning, up almost 2%, while U.S. West Texas Intermediate futures stood at $37.72, around 1.6% higher.
Oil prices have tumbled around 40% year-to-date, as lockdown measures designed to slow the spread of the coronavirus created an unparalleled demand shock in energy markets.
The IEA said oil demand in the second quarter, which saw the greatest impact from lockdown measures, was 17.8 million barrels per day lower when compared to the same period last year. That level of demand reduction was slightly less than the group had previously expected, although still unprecedented.
In its closely-watched oil market report, the Paris-based energy agency said on Tuesday that demand was expected to fall by 8.1 million barrels per day in 2020, before growing by 5.7 million barrels per day in 2021.
It means the expected drop in oil demand this year amounts to the largest in history, the IEA said, with the demand rise in 2021 forecast to be the largest one-year jump ever recorded “as activity begins to return to normal across vast swathes of the economy.”
Meanwhile, the IEA’s forecast for oil demand in 2020 is 91.7 million barrels per day, nearly 500,000 barrels higher per day than it expected in May, due to stronger-than-anticipated deliveries during the coronavirus lockdown.
One industry expected to continue to drag on oil demand through 2021 is aviation.
The IEA said that next year oil consumption would remain 2.4 million barrels per day lower than 2019 levels, “mostly because of the ongoing weakness in jet and kerosene demand.”