A resurgence of coronavirus cases will have ‘major consequences’ for the oil market, International Energy Agency (IEA) warns

CNBC reports that the International Energy Agency (IEA) said that market forces had "demonstrated their power" on the supply side of the oil market in recent weeks, but concerns remain over the potential for a second wave of Covid-19 infections.

"Oil production is reacting in a big way to market forces and economic activity is beginning a gradual-but-fragile recovery," the IEA said. "However, major uncertainties remain."

"The biggest is whether governments can ease the lockdown measures without sparking a resurgence of Covid-19 outbreaks," the Paris-based energy agency added.

Another risk, the group said, was whether oil producers OPEC and its non-OPEC allies, sometimes referred to as OPEC+, would achieve a high level of compliance with its agreed output cuts.

"These are big questions - and the answers we get in the coming weeks will have major consequences for the oil market," the IEA said.

In its closely-watched monthly report, the IEA's outlook for oil demand showed a fall of 8.6 million barrels per day (b/d) to 91.2 million b/d this year. That's 0.7 million b/d more than the group anticipated in its previous report.

This projected fall of oil consumption would be the biggest demand drop in history, the IEA said.

On the supply side, it expected a "spectacular" fall of 12 million b/d this month, falling to a nine-year low of 88 million b/d.

The IEA said output cuts from countries outside the OPEC+ agreement, such as the U.S. and Canada, meant output was 3 million b/d lower in April than at the start of the year. The group said it could be 4 million b/d lower in June, "with perhaps more to come."