With oil prices behaving the way they have been, it comes as no surprise that the International Energy Agency (IEA) said on Thursday it expects global energy demand to hit a record decline—the worst fall since World War II.

The forecast comes as 4.2 billion people globally are subject to stay-at-home orders, which will tamp down demand for energy through 2020. IEA is forecasting a 6% decline in energy demand, which is the largest decline in 70 years.

If that’s not all, the decline is equal to seven times that of the decline experienced during the financial crisis in 2008, according to a CNBC report.

“In absolute terms, the decline is unprecedented — the equivalent of losing the entire energy demand of India, the world’s third largest energy consumer,” the agency’s Global Energy Report said.

However, it wasn’t all doom and gloom for the energy sector. As the number of coronavirus cases dwindle, businesses will reopen and a sense of normalcy will help energy demand tick higher—based on this scenario, demand loss could only be 3.8%.

Back to the negative side of things, if a second wave of coronavirus cases hits, then a nightmare scenario could mean a decline of greater than 6%.

“This is a historic shock to the entire energy world. Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil, and gas,” IEA executive director Fatih Birol said in a statement. “It is still too early to determine the longer-term impacts, but the energy industry that emerges from this crisis will be significantly different from the one that came before,” he added.

For macro trades in the energy sector as a whole, funds to consider are the Direxion Daily Energy Bull 3X Shares (NYSEArca: ERX)  for bullish plays and the Direxion Daily Energy Bear 3X Shares (NYSEArca: ERY) for bearish opportunities.

Fund features:

  • ERX seeks daily investment results equal to 300% of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector which includes the following industries: oil, gas and consumable fuels; and energy equipment and services.
  • On the other end of the spectrum, ERY seeks daily investment results that equate to 300% of the inverse of the daily performance of the Energy Select Sector Index. The index is provided by S&P Dow Jones Indices and includes domestic companies from the energy sector which includes the following industries: oil, gas and consumable fuels; and energy equipment and services.

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