Anjli Raval, Senior Energy Correspondent
The crude market outlook is more “fragile” than initially expected after the recovery in oil demand stalled as global authorities implemented new measures aimed at arresting the spread of coronavirus, the International Energy Agency said
In its monthly oil market report published on Tuesday, the Paris-based body said: “The uncertainty created by Covid-19 shows little sign of abating.”
New outbreaks of the virus in Europe and ever-higher case numbers in countries such as India, are weighing heavily on economic activity and would “lead to lower expectations for a recovery in energy demand”, the IEA said.
The initial sharp recovery, led by gasoline, has now lost momentum. “It is becoming increasingly apparent that Covid-19 will stay with us for some time,” the IEA added.
For 2020 on average, the IEA expects a fall in demand of 8.5m barrels a day, which is steeper than last month’s estimate. At a total of 91.7m b/d, demand will have returned to its 2013 levels.
Even as sentiment about demand is weakening, supply is still expected to go up as production cuts from Opec, Russia and other countries – agreed in April – continue to ease. Global oil supply rose by 1.1m b/d in August to 91.7m b/d, but this is still down 9.3m b/d versus a year ago
This means stockpiles will not shrink at the pace that the IEA once thought, keeping pressure on prices. Brent crude, the international oil benchmark, is back below $40 a barrel having recovered after hitting a low of about $20 a barrel in April.
The IEA said China’s crude purchases that had provided strong support to the crude market had slowed sharply. Separately, weak margins meant there was little incentive for refiners to keep buying. At the same time some of the world’s biggest oil traders are again chartering ships to store oil at sea.
“With the on-coming northern hemisphere winter, we will enter uncharted territory regarding the virulence of Covid-19,” the IEA said.