Opec sees steeper oil demand drop
Opec will hold a joint ministerial monitoring committee on Thursday, where it will discuss plans to further relax production curbs in the coming months.
The economic hit from the coronavirus pandemic will hurt global energy demand harder and for longer than previously feared, the Organisation of the Petroleum Exporting Countries (Opec) said on Monday, and warned that risks remain "elevated and skewed to the downside" for the first half of 2021.
In a closely-watched monthly report published on Monday, Opec downwardly revised its outlook for global oil demand to an average of 90.2 million barrels per day in 2020, down by 9.46 million bpd. That's down 400,000 bpd from the previous month's estimate of 9.06 million bpd.
The Vienna-based oil exporters' group cited slowing economic activity, a slower-than-anticipated recovery in transportation fuel demand, and rising coronavirus cases in India, Indonesia, Thailand and the Philippines as playing a large part in its latest forecast cut.
Marking the group's 60th anniversary, Opec Secretary-General Mohammad Barkindo said on Monday that the coronavirus pandemic was "one of the greatest global challenges of modern times."
"Beyond the terrible human suffering it has caused, it has triggered one of the worst global economic recessions and oil market downturns in Opec's history," he added
Monday's report comes ahead of the meeting of Opec's joint ministerial monitoring committee on Thursday, at which the group and its allies will discuss plans to further relax production curbs in the coming months.
While there are few signs that the Opec+ alliance plan to adjust those plans this month, "the impact of Covid-19 related developments on already fragile global economic conditions remain[s] challenging and will require coordinated global policy action from all market participants," Opec said in its statement.
Oil prices slipped on Monday, with Brent crude oil, the global benchmark, down 0.5 per cent at $39.62 a barrel. West Texas Intermediate futures, the US benchmark, were down 0.5 per cent at $37.14 a barrel, with investors concerned about reports that Libyan supply may soon return to the market and that Emirati compliance with production cuts has dropped, said Eugen Weinberg, head of commodities research at Commerzbank.
"Risks remain elevated and tilted to the downside, particularly related to the development of Covid-19 infection cases as well as possible cures," Opec said of the 2021 outlook.
"Increased usage of teleworking and distance conferencing is estimated to limit transportation fuels from fully recovering to 2019 levels."
Opec also cut its demand forecast for 2021 and sees consumption rising by 6.62 million bpd, 370,00 bpd less than expected last month.
To tackle the drop in demand, Opec and its allies agreed to a record supply cut of 9.7 million bpd that started on May 1, while the United States and other nations said they would pump less.
The report said Opec's output rose by 760,000 bpd to 24.05 million bpd in August, as the 9.7 million bpd cut tapered to a reduction of 7.7 million bpd from August 1.That amounted to 103 per cent compliance with the pledges, up from July's figure of 97 per cent.
The report also forecast demand for Opec crude will be lower than expected this year and next, as supply increases outside the group and because of the reduced global demand outlook. Demand for Opec crude this year will average 22.6 million bpd, down 700,000 bpd from the previous forecast. Next year's forecast was cut by 1.1 million bpd.
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