Brent Slips as IEA Projects Slow Demand Recovery

By Adedapo Adesanya

The Brent crude price fell on Thursday by 28 cents or 039 per cent at the global oil market to $71.16 per barrel, data showed.

The fall was buoyed by a report from the International Energy Agency (IEA) that the spread of the Delta variant of the coronavirus would slow the recovery of global oil demand.

This also had a negative effect on the price of the United States West Texas Intermediate (WTI) crude oil futures, which contracted by 32 cents or 0.46 per cent to $68.93 per barrel.

The IEA’s latest oil market report said the outlook for the remainder of 2021 has been downgraded because of the worsening progression of the COVID-19 pandemic and revisions to historical data.

Restrictions to curb the spread of the coronavirus’s Delta variant in China, the world’s largest importer of oil, as well as other parts of Asia are chipping away what had been a renewed appetite for crude this year.

The IEA now sees global oil demand rising by 5.3 million barrels per day on average to 96.2 million barrels per day this year and by a further 3.2 million barrels per day in 2022.

This is coming after the Organisation of the Petroleum Exporting Countries and allies (OPEC+) agreed to open the taps to the tune of 400,000 barrels per day each month starting in August – a move meant to unwind output cuts imposed at the height of the pandemic last year.

That helped the world oil supply increase by 1.7 million barrels per day in July to 96.7 million barrels per day, the IEA report found.

Production was also boosted after Saudi Arabia, OPEC+’s biggest producer, ended its voluntary production cuts and the North Sea production rebounded after undergoing maintenance.

Other producers outside the alliance also increased their output by 600,000 barrels per day this year and their supply is “expected to rise by 1.7 million barrels per day in 2022, with the US accounting for 60 per cent of the growth,” the Paris-based agency projected.

OPEC also released its monthly oil market report on Thursday but unlike IEA’s grim outlook, the cartel’s outlook is slightly positive.

OPEC sees oil demand rising by about 6 million barrels per day to an average of 96.6 million barrels per day this year –  increasing by a further 3.3 million barrels per day in 2022 for an average of 99.9 million barrels per day.