By Adedapo Adesanya
Wednesday saw major crude oil benchmarks regaining more than two per cent out of losses they recorded in the previous sessions.
Yesterday, the Brent crude rose $1.21 or 2.78 per cent to $40.71 a barrel. The benchmark dropped more than five per cent at the Tuesday session to fall below $40 a barrel for the first time since June.
On the other hand, the United States West Texas Intermediate (WTI) crude gained $1.29 or 3.5 per cent to trade at $38.05 per barrel, having fallen more than seven per cent in the previous session.
The market had fallen at the preceding session caused by worries that the demand outlook, driven by the pandemic, continued to limit crude’s recovery potential after falling more than one-third from 2019 levels this year.
The bounce in prices on Wednesday came as a result of the market recovering from an oversold position as investors rushed to take crude at lower price leading the market to rebound.
Meanwhile, coronavirus pandemic cases continue to rise in India, Great Britain, Spain and several parts of the United States and these outbreaks are threatening to further slow global economic recovery and reduce demand for fuels from aviation gas to diesel.
Authorities in 214 countries and territories have reported about 27.7 million COVID‑19 cases and 900,000 deaths since China reported its first cases to the World Health Organization late last year.
The US Energy Information Administration (EIA) on September 9 cut its 2020 world oil demand growth forecast by 210,000 barrels per day to 8.32 million barrels per day.
In its monthly forecast, the agency cut its oil demand growth estimate for 2021 by 490,000 barrels per day to 6.53 million barrels per day.
As at press time, industry data on US crude stockpiles that were expected had not been released but expectations that they will fall for a seventh straight week also supported prices.
On the supply front, the Organisation of the Petroleum Exporting Countries and its allies (OPEC+) oil production climbed by 1.71 million barrels a day to 34.63 million barrels a day in August from a month earlier, according to a new survey. This puts compliance at 97 per cent with the new quota.
OPEC+ had previously reached an agreement to ease record production cuts of 9.7 million barrels a day to 7.7 million barrels a day starting in August till December.
