Demand for oil is recovering, and prices could move beyond $45 per barrel in 2020, as demand recovers in Asia and Europe.
Oil demand has sprung back in Asia, Europe and is inching closer to normal in North America, but remains depressed in emerging markets, according to Julius Baer.
Norbert Rücker, head, economics and next generation, at Julius Baer, said: “The oil market is seemingly enjoying a calm summer break after turbulent times. Demand recovers and is almost back to normal across many regions, while production is constrained in parts for longer. The supply glut slowly disappears.”
Due to petro-nations’ production cuts and the shale industry’s activity freeze, supply trails demand and the surplus has begun to be slowly worked off, said Rücker.
“These trends seem visible, for example, in the official US market statistics, which show incrementally receding oil inventory levels as of late, or in the disappearance of floating oil storage.”
The easing of the supply glut means the oil market is entering the second phase of market recovery, and after the easing of fears driving the initial fast rebound, should bring about soft and steady support to prices, he said, concluding: “The oil market mood looks balanced and should strengthen rather than weaken going forward, adding somewhat to the tailwinds to oil prices. We stick to our Constructive view and see prices moving beyond $45 per barrel later this year.”
However, oil cartel OPEC said that demand will fall more steeply in 2020 than previously forecast due to COVID-19 and there are doubts about next year's recovery.
World oil demand will fall by 9.06 million barrels per day (bpd) this year, more than the 8.95 million bpd decline expected a month ago, OPEC said in its monthly report.
(Writing by Imogen Lillywhite; editing by Seban Scaria)
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