OPEC has worsened the forecast of a decrease in oil demand

Andrew Cummings
September 15, 2020

Oil prices slipped slightly on Monday amid concerns about a stalled global economic recovery and with Libya poised to resume production, and failed to get support from an impending storm which has disrupted US output.

Brent oil futures edged up 0.15% to $39.89 by 10:05 PM ET (3:05 AM GMT), revering earlier losses.

"The storm is taking production offline in the Gulf of Mexico, and the market doesn't care - that shows just how bad the situation is", said Bob Yawger, director of energy futures for Mizuho in NY.

Tropical Storm Sally gained in strength in the Gulf of Mexico west of Florida on Sunday and was poised to become a category 2 hurricane.

Production of liquid hydrocarbons in Russian Federation (oil and condensate) in August increased by 0.49 million barrels per day in monthly terms, to 9.97 million barrels per day.

"Furthermore, the speed of recovery in economic activities and oil demand growth potential in Other Asian countries, including India, remain uncertain". This is the second weather disruption to oil production in less than a month, with hurricane Laura forcing shutdowns less than three weeks earlier.

"As such, 2021 world oil demand is now forecast to grow by 6.6 mb/d, some 0.4 mb/d lower compared with the previous month's assessment to average 96.9 mb/d".

OPEC, in its monthly report, said it now expects global oil demand to contract by 9.5 million barrels a day to 90.2 million barrels a day, versus its previous call for a 9.1 million barrel-a-day fall.

The organisation, which disclosed this in its September 2020 Oil Market Report, obtained by Vanguard, said that the output was based on data collected from what it referred to as "direct communication", adding that the country's output remained at 1.4 mb/d when based on "secondary sources". "And the market is pricing this in today", said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

"Unquestionably, this could put OPEC+ in an even more giant pickle, when they hold a virtual meeting on Thursday to review the current production intervention level's price impacts".

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