It was around the middle of this month that both the IEA and the OECD cut their global demand projections. The latest monthly OPEC report projected that oil demand growth for OPEC crude would fall by 700K bpd to 22.6 milk bpd for 2020. The future demand growth was revised down even further for 2021. This was reduced by 1.1mln bpd to 28.2mln bpd. The reasons that OPEC cited the 2020 demand cut was due to weaker oil demand performance. This was especially highlighted in the sector called ‘other Asia’, especially India. OPEC reported that the effect on oil demand in ‘other Asia’ is likely to spill over into 1H21 with a slower recovery in transportation fuel demand in the OECD countries. Unsurprisingly, OPEC said risks remain elevated and skewed to the downside, particularly due to COVID-19 related risks.
According to Bloomberg yesterday on their market’s live Blog, there are now further signs of global demand slowing down. China’s buying spree is losing strength. India’s demand is slumping with the nation still trying to contain the outbreak, and the bleak outlook for further US stimulus is weakening the consumption expectations for the US. In turn, more production is set to come back on line with Libya moving nearer to re-open their wounded oil industry. Goldman Sachs project that around 500K bpd will be coming back into production by year end. On top of this OPEC+ did not discuss the potential of restoring some of their production cuts at last week’s meeting.
Technically price is contained by the 200DEMA on the daily chart, so that should provide near term risk for sellers.
This should invite US oil sellers on any rallies higher as long as this situation remains the case.