The prospects for the global economy continue to fall, with increasing numbers of analysts predicting that oil demand will shrink in 2020.

Despite the recent rebound in oil prices – largely stemming from the first 50 basis point cut by the US Federal Reserve after the global financial crisis and the expected reductions in OPEC+ production – the spread of the coronavirus shows no sign of delay.

The Fed’s loosening of monetary policy was initially welcomed by the market on Tuesday, but the stock rally quickly faded.

The move, which was seen as a sign of despair, first brought yields on US 10-year government bonds below 1% for the first time. But the stock reacted, wiping out much of what was gained on Monday. The COVID-19 virus is essentially a public health problem and will ultimately require a medical solution, and not monetary.

Other central banks around the world quickly followed in the Fed’s footsteps. But while looser monetary conditions can soften the blow to the economy, widespread quarantine measures, factory shutdowns, and travel restrictions have significantly reduced oil consumption.

“While such redundancies will help normalize oil demand and stocks later this year, they cannot prevent the already high accumulation of oil stocks already started”, Goldman Sachs wrote in a note. “In addition, the expected OPEC+ yield contraction of about 1 million barrels per day will remain well below the forecast value of 2.1 million barrels per day, which will be erased by demand in the first half only”, they added.

Goldman Sachs again lowered its oil demand forecast, this time to -0.15 million barrels per day. That is, the bank sees demand shrink by 0.15 million barrels a day this year, lower than expected growth of 0.55 million barrels per day earlier and 1.1 million barrels per day, predicted before the boom of the coronavirus.

“Given the bigger hit on demand, we are lowering our oil price forecast again, expecting the Brent price to drop to 45 USD per barrel in April before gradually recovering to 60 USD per barrel by the end of the year”, added Goldman Sachs.

If oil demand shrinks in 2020, this will only be the fourth such case in 40 years.

FGE also estimates that it will shrink by about 220,000 barrels a day this year.

Negative demand growth has seemed like an extremely pessimistic prospect over the last few days. This opinion is now quickly becoming the prevailing perspective or at least a fairly reasonable prediction.

IHS Markit said Wednesday that oil demand will decline in the first quarter “with the largest volume in history – even exceeding the downturn in the 2009 financial crisis”. The company sees oil demand shrink by 3.8 million barrels per day in the first quarter.

“There has never been such a quarterly decline”, writes IHS Markit.

Lower prices also have an impact. US drilling companies are unable to make money at these price levels, and the financial pressure on them continues to increase.

“We will reduce our projection for shale fuel production in the US by 0.15 million barrels per day and 0.25 million barrels per day for the third and fourth quarters of 2020”, said the analysts of Goldman.

Still, the slowdown in shale oil production in the US is well below the expected loss in demand, with global oil surplus expected to reach 1.65 million barrels per day in the first half of the year, the bank added.

And it seems that OPEC+ will work for the benefit of the American industry. The cartel’s representatives and its allies gathered in Vienna to discuss the impact of the coronavirus on production and to limit further yields to prevent a new price slump. According to Bloomberg, the group is considering shrinking production by 1.5 million barrels per day, with no final agreement yet.

Such a reduction in production would help to curb the surplus, but it is not very clear whether this will be enough to avoid a further decline.