By Adedapo Adesanya
The oil market was bearish on Friday as prices headed south on the back of information that demand would recover more slowly than expected from COVID-19 pandemic lockdowns.
As a result, the international benchmark, Brent crude futures, dropped 13 cents or 0.29 per cent to $44.83 per barrel, while the US benchmark, West Texas Intermediate (WTI) crude futures, fell 15 cents or 0.36 per cent to $42.09 per barrel.
This week, two prominent forecasters, the International Energy Agency (IEA) and the Organization of the Petroleum Exporting Countries (OPEC), trimmed their 2020 oil demand forecasts.
OPEC sees demand tumbling by 9.06 million barrels per day this year more than the 8.95 million barrels per day decline expected a month ago. The expected decline in demand is 100,000 barrels a day lower than last month’s forecast.
On its part, the IEA cut its global oil demand forecasts, for the first time since the start of the pandemic, by 140,000 barrels of oil to 91.9 million barrels per day in 2020. The forecast is more than 8 million barrels per day lower than the global demand for oil last year.
The IEA also downgraded its expectations for 2021, cutting 240,000 barrels per day from its previous forecasts to an average of 97.1 million barrels per day next year.
The Paris-based agency said it remained cautious about a recovery in oil demand over the second half of the year and chose to downgrade its forecasts following an upsurge in COVID-19 cases.
The deeper cuts to oil demand forecasts for 2021 are due to the gloomy outlook for the global aviation industry.
Also affecting the market was the rising supply of the product, which overshadowed optimism over falling crude and fuel inventories.
OPEC and its allies are increasing output this month and this is expected to contribute more oil to the market and with slow demand, the draw means supply will outweigh demand.
Although this week, prices had been bolstered by data which showed that crude oil inventories fell last week as refiners ramped up production and demand for oil products rose, the pressing problem associated with the coronavirus will always come back to snap this.
According to analysts, sentiments about what is going to happen next with the virus will largely weigh on prices until the end of the year.
This means that even if oil inventories fall more in the coming weeks, support may not last much in the face of uncertainty.
Modupe Gbadeyanka