Oil Moves Towards The $48 Level

Oil Video 15.12.20.

IEA Cuts Its Oil Demand Forecast For 2021

Yesterday, we discussed the latest revisions of OPEC oil demand forecast for the next year. OPEC cut its demand forecast from 96.26 million barrels per day (bpd) to 95.89 bpd due to the negative impact of the second wave of the virus.

Today, IEA folowed OPEC’s steps and stated that its 2021 demand forecast was revised down by 170,000 bpd. According to IEA, jet fuel/kerosene demand will remain under pressure while demand for gasoline and diesel should return to 97-99% of their 2019 levels.

Interestingly, IEA notes that European oil demand in the fourth quarter of 2020 will be lower than in the previous quarter due to lockdowns. In recent weeks, many European countries announced additional restrictions for the upcoming holiday period so European oil dmeand will likely remain weak in the first quarter of 2021.

In the near term, oil bulls will have to rely on the continued rebound in Asia as it’s hard to expect any good news from Europe in the next few months. The virus situation in the U.S. remains challenging but it does not have an additional negative impact on oil demand. At the same time, it should be noted that gasoline demand is seasonally slow at this time of the year so crude inventories  and gasoline inventories may continue to increase.

Oil Easily Ignored All Bad News

Recent days were full of bad news for the oil market. Last week’s EIA Weekly Petroleum Status Report showed a significant increase in inventory levels, European countries announced new restrictions, IEA and OPEC cut their oil demand forecasts for 2021…

Despite these catalysts, oil is currently trying to settle above multi-month highs at $47.70. The current rally is fueled by vaccine optimism, and oil traders look ready to push oil towards the psychologically important $50 level.

Brent oil has already settled above $50 while WTI trades at a discount due to fears of rapid oil production increase from U.S. shale companies.

According to EIA data, U.S. domestic oil production is at the 11.1 million bpd level. Most likely, it will increase together with the price of oil, and the only question is whether this increase will be significant enough to put pressure on oil prices.

For a look at all of today’s economic events, check out our economic calendar.