IEA raises 2020 oil demand forecast but warns COVID-19 clouds outlook

The easing of lockdown measures in many countries caused a strong rebound to fuel deliveries, the International Energy Agency said. (AFP file photo)
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Updated 11 July 2020

IEA raises 2020 oil demand forecast but warns COVID-19 clouds outlook

  • Saudi Arabia cuts production by 1 million barrels per day more than required under OPEC+ deal
  • Easing of lockdown measures in many countries caused a strong rebound to fuel deliveries

LONDON: The world will need more oil this year than previously thought, according to the International Energy Agency (IEA).The Paris-based body boosted its forecast to 92.1 million barrels per day (bpd), up by 400,000 bpd from its last outlook report published in June. 

Still, the spread of the coronavirus pandemic remains a significant threat to the energy sector.

“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 IEA said in its report.

World oil demand is projected to decline by 7.9 million bpd in 2020 and to recover by 5.3 million bpd in 2021. 

FASTFACT

7.9 million

World oil demand is projected to decline by 7.9 million bpd in 2020.

Futures markets are betting that the oil market will move from substantial surplus in the first half of the year to a deficit in the second half.

But for refiners, any benefit from improving demand is likely to be offset by expectations of much tighter feedstock markets ahead, the IEA said. 

Global oil supplies fell sharply in June as the group known as OPEC+, which includes the Organization of the Petroleum Exporting Countries (OPEC) and other countries including Russia, agreed to slash production.

The compliance rate, that is the degree to which countries meet their production cut commitments, was 108 percent. This included over-performance by Saudi Arabia which cut production by 1 million bpd more than required, reducing OPEC crude output to its lowest point in nearly three decades. 

In the US, oil production has tumbled as shale producer struggle to pump profitably as prices weaken.

Total US oil production fell by nearly 1 million bpd in April compared with March. The IEA expects that May and June will see further month-on-month falls of 1.3 million bpd and 0.5 million bpd, respectively. 


Iraq pledges full compliance with OPEC+ oil cuts

Updated 07 August 2020

Iraq pledges full compliance with OPEC+ oil cuts

  • Prince Abdulaziz bin Salman Al-Saud, the Saudi Arabian energy minister, and his Iraqi counterpart, Ihsan Ismail, reaffirmed their commitment to the cuts
  • Under tough economic pressure, Iraq had struggled to meet the full cuts, but Ismail promised to reach 100 percent this month

DUBAI: Iraq has pledged to meet in full its obligations under the OPEC+ oil production cuts that have been credited with rebalancing global crude markets after the mayhem of April’s “Black Monday” when prices crashed around the world.

In a telephone call between Prince Abdulaziz bin Salman Al-Saud, Saudi Arabian energy minister, and his Iraqi counterpart, Ihsan Ismail, the two men reaffirmed their commitment to the cuts, which have helped to pull the oil price back from historic lows.

Brent crude, the global benchmark, has more than doubled in the past three months.

Under tough economic pressure, Iraq had struggled to meet the full cuts, but Ismail promised to reach 100 percent this month. Iraq has now committed itself to an ambitious program of compensation to make up for past overproduction.

Iraq will further reduce production by 400,000 barrels per day this month and next, Ismail said, bringing its total cut to 1.25 million barrels daily. That level of cuts could be adjusted when final estimates of compliance are assessed by the six “secondary sources” that monitor OPEC+ output.

“The two ministers stressed that efforts by OPEC+ countries toward meeting production cuts, and the extra cuts under the compensation regime, will enhance oil market stability, help accelerate the rebalancing of global oil markets, and send a constructive signal to the market,” a joint statement added.

Prince Abdulaziz thanked Ismail for his efforts to improve Iraq’s compliance with the agreement.

Iraq had been the biggest laggard in the move toward 100 percent compliance by the 23 members of the OPEC+ alliance.

Officials in Riyadh told Arab News that Iraqi compliance had reached about 90 percent, a high level by the country’s previous standards but still short of the new targets.

Saudi Arabia has been forcefully advocating full compliance with the targets in an effort to remove oil from the global market as demand is still badly affected by the economic fallout from the COVID-19 pandemic.

The oil market will be under the spotlight later this month when the joint ministerial monitoring committee of OPEC+ energy ministers convenes virtually in the most recent of the monthly meetings set up to oversee the state of the global industry.

Oil had another strong week on global markets, breaking through the $45 barrier for the first time since early March on signs that the glut in US oil stocks was easing, as well as reductions in the amount of “floating crude” stored in tankers on the world’s oceans.

The price spiked on news of the Beirut explosion, which some analysts believed could herald a deterioration in regional security and a threat to oil exports.

Brent crude was trading at $44.70 on international markets.