Supply curbs and uncertain demand to keep oil above $40

The International Energy Agency cut its 2020 oil demand forecast as air travel and consumption declined amid the coronavirus pandemic. (Shutterstock)
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Updated 02 September 2020

Supply curbs and uncertain demand to keep oil above $40

  • The survey of 43 analysts and economists forecast benchmark Brent crude to average $42.75 a barrel in 2020

BENGALURU: Oil prices will see little change this year and a modest uptick in 2021 as output cuts take effect, with the demand picture clouded in uncertainty due to the coronavirus pandemic, a Reuters poll showed on Tuesday.

The survey of 43 analysts and economists forecast benchmark Brent crude to average $42.75 a barrel in 2020, up from July’s $41.50 consensus and compared with an average price of $42.60 so far this year. Brent is expected to average $50.45 in 2021.

The 2020 US crude price outlook rose to $38.82 per barrel from July’s $37.51.

Global demand, meanwhile, was seen contracting more steeply this year, by between 8-10 million barrels per day (bpd) versus July’s 7.2-8.5 million bpd consensus.

“The market’s looking for a catalyst to break out of its recent range,” said Harry Tchilinguirian, head of commodity research at BNP Paribas.

“On the bearish side, this could be a degradation of OPEC+ discipline as prices begin to rise, or more severe economic setback ... On the bullish side, a positive outcome in phase three COVID-19 vaccine trials that will re-shape expectations around the path of a global economic recovery.”

The Organization of the Petroleum Exporting Countries and its allies, or “OPEC+,” have urged nations producing oil above agreed quotas to deepen cuts in August and September.

Its current policy calls for a 7.7 bpd cut.

“OPEC+ will likely support a floor at $40, but plateauing demand recovery and concerns of a COVID-19 second wave will make price gains difficult,” Jefferies analyst Jason Gammel said.

“Declining US production could be supportive into year-end.”

The International Energy Agency this month cut its 2020 demand forecast by 140,000 bpd to 91.9 million bpd and predicted consumption in 2021 will be slightly lower than 2019.

“Air traffic is likely to suffer for longer,” said Norbert Ruecker of Julius Baer.


Britain, EU tell each other to move on trade

Updated 20 October 2020

Britain, EU tell each other to move on trade

  • Both sides call on each other to protect billions of dollars of trade between the neighbors

BRUSSELS: Britain and the EU said on Monday the door was still open for a deal on their post-Brexit relationship, calling on each other to compromise to find a way to protect billions of dollars of trade between the neighbors.

With just over two months before Britain ends a status quo transition arrangement with the EU, talks on a trade deal are deadlocked, with neither wanting to move first to offer concessions.

A no-deal finale to Britain’s five-year Brexit drama would disrupt the operations of manufacturers, retailers, farmers and nearly every other sector — just as the economic hit from the coronavirus pandemic worsens.

European Commission Vice President Maros Sefcovic repeated on Monday that the EU still wanted a trade deal but not “at any cost” after British Prime Minister Boris Johnson said on Friday there was no point in continuing talks.

“It has to be a fair agreement for both sides — we are not going to sign an agreement at any cost,” Sefcovic told reporters after meeting Michael Gove, Britain’s point man on the existing divorce agreement, in London.

“The EU is ready to work until the last minute for a good agreement for both parties,” Sefcovic said.

Britain, increasingly frustrated by the EU’s refusal to start text-based talks, called on the bloc to make the first move, with its housing minister saying that Brussels only had to make “some relatively small but important changes.”

Housing Secretary Robert Jenrick called on the EU to “go that extra mile, to come closer to us on the points that remain for discussion.”

A spokesman for Johnson again ruled out prolonging any negotiation beyond the end of this year, when the transition period runs out, saying the EU “must be ready to discuss the detailed legal text of a treaty in all areas with a genuine wish to respect UK sovereignty and independence.”

EU chief negotiator Michel Barnier had been due in London for talks with British counterpart David Frost this week. Instead, they will now speak by telephone on Monday to discuss the structure of future talks, Barnier’s spokesman said.

Negotiations broke down on Thursday, when the EU demanded Britain give ground. Issues still to be resolved include fair competition rules, including state aid and fisheries. EU diplomats and officials cast Johnson’s move as a frantic bid to secure concessions before a last-minute deal was done, and European leaders have asked Barnier to continue talks.

British officials have repeatedly said any deal has to honor Britain’s new status as a sovereign country and not try to tie it to EU rules and regulations.

German Chancellor Angela Merkel said compromises on both sides would be needed. French President Emmanuel Macron said Britain needed a deal more than the 27-nation EU.

Britain is launching a campaign this week urging businesses to step up preparations for a no-deal departure. In a statement accompanying the launch, Gove says: “Make no mistake, there are changes coming in just 75 days and time is running out for businesses to act.”

More than 70 British business groups representing over 7 million workers on Sunday urged politicians to get back to the negotiating table next week and strike a deal.