Oil prices slip after IEA cuts demand forecast

  • Oil prices slip after IEA cuts demand forecast

Oil prices slip after IEA cuts demand forecast

The Paris-based IEA slashed its 2020 outlook by 140,000 bpd to 91.9 million bpd, its first downgrade in several months.

Data cited by the IEA indicated that mobility in many regions had reached a plateau but was increasing in Europe, though a rise in COVID-19 cases caused the agency to cut demand estimates for gasoline.

But IEA still said it expects global oil supply to fall by 7.1 million of barrels per day in 2020 and increase by 1.6 million of barrels per day next year.

Oil producers will be watching developments on the global economy and while the stock market is going through a better recovery, oil demand growth is not moving as quickly as other markets. This is expected to further depress oil prices and force oil producers to effect another round of cut in output.

All three of the world's main oil forecasting agencies - the International Energy Agency, the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries - published new quarterly forecasts this week and none project oil demand back at 2019 levels by the end of next year.

The US accounts for around a quarter of all global infections.

The IEA, which advises western governments on energy policy, noted there had been a recovery in business and industrial activity, as well as e-commerce, which has been reflected by a strong pick-up in trucking activity.

In a sign of continued weak demand, a company majority-owned by Royal Dutch Shell Plc said it will shut a 110,000 barrel-a-day refinery in the Philippines.

Jet fuel demand remains a major source of weakness, as the number of aviation kilometres travelled in July was still 67 per cent lower than past year. It was 80 per cent down in April.

The global coronavirus pandemic is weighing heavily on worldwide demand for oil as the aviation and transport sectors, in particular, struggle with the fallout from the lockdowns aimed at reining in the disease, the International Energy Agency said today.

Supply on the other hand rose by 2.5m bpd to 90m bpd in July, following relaxation of output curbs by Saudi Arabia and its allies, who are part of the Opec+ group.

Undoubtedly, the fallout of the government-imposed restrictions to mitigate the spread of Covid continue: Royal Dutch Shell will permanently shut its 110,000 bpd facility in Philippines' Batangas province, one of only two oil refineries in the country; and Marathon Petroleum, the largest US refiner by volume, plans to permanently halt processing at refineries in Martinez, California, and Gallup, New Mexico.

"While Opec+ cuts ease by almost 2m bpd this month and other producers restore shut-in volume, compensation for earlier Opec+ over-production could keep world supply steady in August", the IEA said.