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The IEA said Thursday that it now expects oil demand to decline by 8.8 million barrels a day this year, compared to last month’s forecast of a reduction of 8.4 million barrels. It lowered the demand forecast for the second half of this year and the first quarter of 2021.
Preliminary data showing that a potential Covid-19 vaccine developed by Pfizer and BioNTech is highly effective has pushed Brent crude futures above $ 45 a barrel before this low, their highest level in more than two months, as traders are betting that a vaccine would stimulate economic activity and encourage a return to travel. Brent was around $ 44 a barrel on Thursday, with West Texas Intermediate, the US benchmark, trading at $ 41.50 a barrel.
“In our view, oil prices are enjoying the latest leg of a vaccine rally that may fade soon as fundamental realities begin to sink,” Bjornar Tonhaugen, head of oil markets, said in a note to clients Wednesday. by Rystad Energy. .
“The problem is that the acceleration in demand will not happen only because of the positive news from the results of the vaccine tests: it is the blocks that must be able to keep the spiral of Covid cases under control,” he added.
The Organization of Petroleum Exporting Countries (OPEC), which includes Saudi Arabia, said on Wednesday weaker-than-expected demand in the US transportation sector and blockages in Europe will be a drag on crude oil. “The recovery in oil demand will be severely hampered and the slow pace of transport and demand for industrial fuels is expected to last until mid-2021,” the group said.
World oil demand is projected to contract by around 9.8 million barrels a day this year, before growing by 6.2 million barrels a day next year, a downward revision from the month’s valuation. last.
At least for now, oil prices are holding up gains in the expectation that OPEC and its allies, including Russia, will hold back planned supply hikes. “There have been many indications from both Saudi Arabia and Russia – the de facto glue of the oil-cutting alliance – that it will be possible to delay production increases. [of 2 million barrels a day] starting January 2021, “Tonhaugen of Rystad said.
Discussion among OPEC members suggests the group could postpone the planned closure of production cuts by about three to six months, according to Commerzbank analysts. But that won’t be enough to prevent oversupply, particularly given increased production in countries that have not accepted the cuts, such as Libya, they said in a research note Thursday. Oil prices face an “unfavorable fundamental environment,” they added.
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