International Energy Association (IEA) increased its global oil demand outlook for 2020 at an average of 92.1 million barrels per day (mb/d), an increase of 400,000 bpd from its outlook last month but down by 7.9 mb/d versus 2019. The recent increase in Covid-19 cases and the introduction of partial lockdowns introduced more uncertainty to the forecast, It said in its monthly Oil Market Report (OMR).
Oil prices climbed more than 2 percent at $43.24 a barrel on Friday after IEA bumped up its 2020 demand forecast.
"While the oil market has undoubtedly made progress since 'Black April', the large, and in some countries, accelerating number of Covid-19 cases is a disturbing reminder that the pandemic is not under control and the risk to our market outlook is almost certainly to the downside," the Paris-based organisation said in its report.
On the supply side, global oil production fell sharply in June to stand 13.7 mb/d below the April level. According to the IEA, the compliance rate with the OPEC+ supply agreement was 108 percent. This includes over-performance by Saudi Arabia which cut production by 1 mb/d more than required, reducing OPEC crude output to its lowest point in nearly three decades.
"For refiners, any benefit from improving demand is likely to be offset by expectations of much tighter feedstock markets ahead. Refining margins will also be challenged by a major product stocks overhang from the very weak 2Q20," the report noted.
IEA has made some minor adjustments to its 2021 outlook and demand will be 97.4 mb/d; but due to the improved outlook for 2020 the recovery next year is lower at 5.3 mb/d.
(Writing by Seban Scaria; editing by Daniel Luiz)
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