OPEC cuts 2021 oil demand forecast again as virus cases rise

Oil storage tanks in Cushing Oklahoma

Prices had traded lower earlier in the session after applications for US state unemployment benefits unexpectedly jumped last week to the highest since August, boding poorly for a sustained recovery in demand.

Oil prices recorded 42.93 dollars a barrel for Brent crude futures at settlement on Friday, down by 23 cents, and US West Texas Intermediate crude futures recorded 40.88 dollars a barrel, down by 8 cents. Earlier, both benchmarks were down more than $1 a barrel.

However, since the JTC met in September, Libyan output has climbed and a global rise in coronavirus cases has led to renewed restrictions on movement in some countries, weakening demand for crude. In the U.S., even as coronavirus cases continue to soar, drillers have begun adding oil rigs after cutting them to a 15-year low in August. As LNG exports rise and the weather turns colder, analysts project average demand will jump for the coming weeks. The average LNG price for December delivery into North-East Asia was estimated at $5.80 per million British thermal units (mmBtu), up 10 cents from the previous week. Analysts polled by S&P Global Platts expected the EIA to report a drop of 2.3 million barrels in US supplies for the week.

"The energy markets are certainly marching to their own drummer at the moment", said Michael McCarthy, chief market strategist at CMC Markets and Stockbroking, adding that recent oil price volatility may have attracted more trader positions.

The bearish demand outlook and rising supply from Libya may mean OPEC+ could roll over the existing cuts into next year, OPEC+ sources said on Thursday.

Also adding to the upside in prices, rumours keep gyrating around the possibility that OPEC+ members could postpone their intentions to increase the oil output - originally scheduled for the end of the year - amidst the persistent advance of the second wave of the coronavirus pandemic.

Top global oil traders Vitol, Trafigura and Gunvor said they saw slow oil demand recovery because of the resurgent pandemic.

OPEC has steadily lowered its 2021 oil demand growth forecast from an initial 7 million bpd expected in July.

President Donald Trump said he is willing to raise his offer of $1.8 trillion for a COVID-19 relief deal with Democrats in the U.S. Congress, but the idea was shot down by his fellow Republican, Senate Majority Leader Mitch McConnell.

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