IEA Says Oil Market More Fragile as Resurgent Virus Hurts Demand


© Reuters.

(Bloomberg) — The outlook for global oil markets has grown “even more fragile” as a resurgent pandemic derails the recovery in demand, the International Energy Agency said.

The IEA, which advises major economies, trimmed forecasts for fuel consumption for the rest of the year and predicted that oil inventories — which rebounded to record levels in July — won’t subside as sharply as anticipated.

“We expect the recovery in oil demand to decelerate markedly in the second half of 2020, with most of the easy gains already achieved,” the Paris-based agency said in its monthly report. “The path ahead is treacherous amid surging Covid-19 cases in many parts of the world.”

are trading below $40 a barrel in London, close to their lowest in more than two months, as the recovery seen earlier this summer begins to falter. The downbeat view from the IEA chimes with bleak assessments this week from oil giant BP (NYSE:) Plc, trading house Trafigura Group, and OPEC.

The IEA’s downgraded outlook underscores the challenge faced by the Organization of Petroleum Exporting Countries and its partners, who have made vast production cuts to prop up the market and will meet later this week to review their progress.

The coalition is also struggling to keep all members committed to its strategy. The United Arab Emirates — traditionally a staunch ally of cartel-leader Saudi Arabia — flouted its production quotas in August, implementing just 10% of its mandated cuts, according to the IEA’s estimates.

Between January and July, world oil demand was on average 10.5 million barrels a day lower than last year, or roughly 10%, as lockdowns aimed at halting the virus emptied roads and grounded flights, the agency said. Even now, consumption remains down by about 10.7 million barrels.

READ  Oil Trades Near $53 as Industry Data Shows U.S. Stockpile Jump

The biggest adjustment to the demand forecast was for the fourth quarter, cut by 600,000 barrels a day. While oil inventories worldwide are still on track to shrink considerably in the second half, by 3.4 million barrels a day, that’s 1 million a day less than predicted a month ago.

Part of the revision stems from the growth in teleworking, which “in the space of just a few months” is having a “meaningful impact” on demand by depressing the need for transport fuels, the IEA said. A sharp slowdown in Chinese purchases has also weighed on the market, it added.

Oil inventories in developed nations rose in July to a record 3.225 billion barrels, even as the OPEC+ alliance led by Saudi Arabia and Russia kept huge volumes of output idle.

Last month the coalition restored some supplies on signs that economic activity was recovering, with output rising by close to 2 million barrels a day, according to the IEA. The cartel will hold a monitoring meeting on Thursday to assess the impact of that decision.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

READ  Exclusive - Citgo, Valero try to return Venezuelan oil following sanctions: document





READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here