The International Energy Agency has reduced its forecast for oil demand for the current year, stressing the need to be careful about the pace of the economic recovery from the Corona pandemic, while major producers and trade companies in the sector expect a bleak future for the oil market.
The Paris-based agency lowered its demand forecast for 2020 by 200,000 bpd to 91.7 million bpd, the second cut of its crude demand forecast in several months.
Oil prices fell in morning trading today, Tuesday, due to concerns about a slow recovery of global fuel demand, which was affected by the Corona virus pandemic.
By 07:12 UTC, global benchmark Brent crude futures for November delivery were down 0.28% to $ 39.5 a barrel.
US West Texas Intermediate crude futures for October delivery fell 0.27% to $ 37.16 a barrel.
And the two crudes closed slightly lower on Monday.
"We expect the recovery in oil demand to slow significantly in the second half of 2020, as most of the easy gains have already been reaped," the International Energy Agency said in its monthly report.
"The economic slowdown will take months to fully reverse," the report added. "Besides, there is a possibility that a second wave of the virus (which is what we are already seeing in Europe) undermines mobility again."
The agency reported that the renewed high incidence of "Covid-19" and the associated general isolation measures, the continuation of remote work and the weakness of the aviation sector are hurting the demand.
It explained that the increase in oil production and the reduction in demand expectations also mean a slower withdrawal of crude oil inventories that accumulated at the height of the general isolation measures.
The agency currently expects an implicit withdrawal from stocks in the second half of the year at about 3.4 million barrels per day, which is about one million barrels per day less than it expected last month, with stocks in developed countries reaching record high levels in July.
OPEC cut its forecast for oil demand this year (Reuters)
"Sentiment remains pessimistic in the oil market due to the gloomy outlook for crude producers," said Chiyuki Chen, chief analyst at Snow Trading.
Major producers and trading companies in the sector expect a bleak future for global fuel demand due to the pandemic that threatens the global economy.
OPEC cut its forecast for oil demand, while the major oil company, BP, said that demand may reach its peak in 2019 and that the time of great oil demand in the world will not return.
The Trafigura Group, a commodity and crop trade, presented a bleak picture for the future, as it expects the return of excess supply in the market, in light of the continued accumulation of stocks until the end of this year.
The Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report that global oil demand will fall to 9.46 million barrels per day this year.
The organization added, Monday, that the production of its members, "13 members", rose by about 763 thousand barrels per day last August, explaining that their production rose to 24 million and 45 thousand barrels per day during the past month, compared with 23 million and 283 thousand barrels per day in July / Previous July.
Last April, the OPEC Plus group reached an agreement providing in its first phase to reduce production by 9.7 million barrels per day until the end of last June, which was extended until the end of last July.
At the beginning of last August, the reduction began to be reduced to 7.7 million barrels per day until the end of 2020, and then to 5.8 million barrels per day until the end of April 2021.
The risk appetite was also weakened by fears of an increase in global supplies, after retired Major General Khalifa Haftar pledged to end the long blockade of oil facilities in Libya.