Global investment in the energy sector is forecast to fall by almost $400 billion this year compared to 2019.
The coronavirus pandemic crushed the energy sector. Before the outbreak, it was on track for growth of approximately 2%. The number would have been the most significant annual increase in spending in six years.
Presently, investment is forecast to drop by 20%. The World Energy Investment, IEA, said in its report that the global economic shock caused by the COVID-19 is having dramatic impacts on investments in the energy sector. According to IEA, weaker investment in the industry comes from two significant factors.
On the one hand, it was affected by the spending cuts because of a hit in demand. On the other hand, lockdown restrictions on the movement of goods and people disrupted investment activity.
IEA said that if current oil investment stayed at 2020 levels, it would decrease the previously forecasted supply level in 2025 by approximately 9 million BPD.
The IEA also noted that many state oil companies are short of funding. Aviation and mobility are leading the decrease in oil investment. The sectors account for 60% of the world demand.
Global demand dropped by approximately 25 million BPD in April.
For 2020, oil demand could decrease by 9 million BPD and go back to 2012 levels.
This year, global investment in oil and gas is forecast to drop by around one-third. It means that the sector could lose nearly $132 billion.
According to IEA, investment in shale is likely to decline 50% this year. It’s because of a loss in investor confidence and no access to capital.
Earlier in the week, the EIA stated that oil had yet to face its peak and oil consumption would go back to pre-crisis levels.
For the first time in history, oil prices turned negative in mid-April. The lack of demand because of the coronavirus pandemic and severe shortage of storage space crushed the oil rates.
Prices have improved since, with both benchmarks – Brent crude, and WTI, – trading at about $35 per barrel
