Today, oil prices fell slightly and maintained yesterday’s growth. The black gold prices were supported by government statistics on declining US reserves and energy demand recovery despite the coronavirus outbreak.
The price of Brent crude had risen about 2% yesterday. Today it is trading at $45.35 per barrel, with a drop of 8 cents. West Texas Intermediate crude, which rose 2.6% yesterday, dropped by 6 cents today to trade at $42.61.
US government statistics show that the country’s crude oil, gasoline and condensate reserves have declined over the past week. Refineries have increased production in response to rising demand. Fuel demand in the United States reached 19.37 million barrels per day last week, the highest level since March. But at the same time, demand for crude oil has fallen from 11 million to 10.7 million barrels per day.
Edward Moya, an analyst at Oanda, stated that if the energy market went undersupplied, oil prices will rise significantly in the last quarter of the year.
US crude inventories fell 4.5 million barrels, while analysts polled by Reuters expected a decline of 2.9 million barrels.
Rising OPEC Pessimism about the Oil Demand Outlook
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) said in a monthly report that global demand for oil in 2020 would fall further than previously expected. It is caused by the coronavirus outbreak and uncertainties about next year’s recovery. The group believes that the demand will drop by 9.06 million barrels per day. That is in comparison to 8.95 million barrels, the group’s forecast last month.
Oil prices collapsed this year due to declining travel and economic activity caused by the coronavirus restrictions. Although some countries have eased quarantine confinements and allowed demand to improve, worries about new outbreaks have kept price growth limited. OPEC expects the trend to continue.
OPEC said in its monthly report that developments in oil and oil prices in the second half of 2020 will be driven by concerns about the second wave of the Coronavirus outbreak and higher global reserves.
Moreover, OPEC did not change its forecast for demand in 2021. And still expects demand to improve by seven million barrels per day. However, the group noted that many ambiguities affect this outlook. Those of which could lead to a negative impact on oil consumption.
Almost all forecasting agencies expect the jet fuel market to remain weak in 2021. Gasoline demand will not return quickly to 2019 levels.
OPEC and its allies reduced their supply by 9.7 million barrels per day. That included from May to the end of July to offset demand. The United States and other countries had to cut production due to market conditions.
According to the OPEC monthly report, the group’s production rose to 980,000 barrels per day in July. As a result, reaching 23.17 million barrels per day. Saudi Arabia and other OPEC members in the Persian Gulf continued to cut production voluntarily last month.
According to Reuters, OPEC’s adherence to the production cut agreement in July was 97%, which fell more than 100% in June.