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Will the pandemic keep the oil market under pressure?

Will the pandemic keep the oil market under pressure?

/ Policy & Regulations / Wednesday, 14 October 2020 05:10

The oil market will remain under pressure with the resurgence of the cases of Covid-19, even if a rigorous winter could raise the prices, according to OPEC forecast.

"The current regional resurgence of Covid-19 infections will continue to negatively affect market morale until a vaccine is available," the cartel says in its monthly report.

"However, the cold winter that is predicted could contribute to an increase (in prices) in the northern hemisphere," he adds.

OPEC’s forecast for global oil demand is roughly unchanged for this year, with an expected drop of 9.5 million barrels per day (mbpd) to 90.3 mbpd.

For 2021, on the other hand, demand has been revised downwards by 0.08 mb/d: OPEC is now expecting a rebound of 6.5 mb/d to reach 96.8 mb/d. This reflects lower economic growth prospects for both OECD and non-OECD developed countries.

On the supply side, the production estimate for countries outside of OPEC was revised up by 0.31 mb/d for this year, mainly due to a stronger than expected recovery of liquid hydrocarbon production in the United States.

However, non-OPEC production was revised downwards by 0.11 mb/d for next year.

In September, production in OPEC countries declined by 47,000 barrels per day compared to August, to 24.106 mb/d, according to secondary (indirect) sources cited in the report.

The United Arab Emirates pumped less last month, while Iraq and Saudi Arabia produced more, on the contrary.

OPEC members and their allies, including Russia, are imposing production cuts in response to the drop in demand and prices caused by the pandemic.

Indeed, prices fell with the crisis, which brought global air traffic to a virtual halt, before recovering and stabilizing at relatively low levels. A barrel of North Sea Brent was worth just over 42 dollars a couple of days ago.

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