Oil Remains Under Pressure As OPEC Cuts Its Oil Demand ForecastOil fails to gain more upside momentum amid fears about the pace of oil demand recovery.
Oil Video 14.09.20.
OPEC Expects Weaker Oil Demand In 2020 And 2021
OPEC has just released its new Monthly Oil Market Report which indicated that it decided to cut the 2020 global oil demand forecast by 0.4 million barrels per day (bpd) to 90.2 million bpd.
The main reasons for this decision were weaker demand in India, which is currently recording more than 90,000 new cases of coronavirus each day, and problems with transportation-related demand.
Israel has just decided to impose a second lockdown, highlighting the uncertainty of oil demand recovery. If other countries that struggle to contain the virus follow Israel’s example, oil will find itself under serious pressure.
OPEC has also cut its 2021 oil demand forecast by 0.4 million bpd and now expects that global oil demand will average 96.9 million bpd in the next year.
At the same time, OPEC has increased its 2020 oil production forecast due to production recovery in U.S., Canada and Latin America.
The picture painted by OPEC looks rather bearish as demand remains under pressure while supply starts to increase. In these conditions, the oil market will continue to have problems with excessive inventory levels.
Most likely, OPEC+ countries will have to keep their current production levels for more months than previously expected in order to improve the supply/demand balance of the oil market.
Tropical Storm Sally Provides Some Support To Oil Prices
Tropical storm Sally forced a shutdown of some offshore oil platforms in the U.S. Gulf of Mexico and provided some support to oil prices.
The most recent EIA Weekly Petroleum Status report indicated that U.S. oil production has not fully recovered from Hurricane Laura, and additional problems with tropical storm Sally may put more pressure on U.S. domestic oil production in the near term.
Baker Hughes Rig Count indicated that the number of U.S. drilling rigs declined by 2 to 254 while the number of U.S. rigs drilling for oil fell by 1 to 180. At this point, the number of U.S. drilling rigs has rebounded closer to levels seen before Hurricane Laura. However, latest rig count data does not show signs of a new upside trend which would have been bearish for oil prices.
It remains to be seen whether Sally will have any notable impact on the oil market as traders will likely stay focused on worsening forecasts for oil demand recovery.
For a look at all of today’s economic events, check out our economic calendar.