By Adedapo Adesanya
Oil prices cut their bullish run on Thursday, November 12 as the International Energy Agency (IEA) cautioned that the vaccine breakthrough won’t quickly revive markets.
The agency further stated that it has lowered its forecasts for global oil demand as a result of the new lockdown measures put in place in Europe, which it said could affect demand for the commodity.
This affected the prices of crude oil yesterday and led to the 47 cents or 1.07 per cent decline suffered by the Brent crude, which traded at $43.33 per barrel. Also, the price of the West Texas Intermediate (WTI) crude went down by 33 cents or 0.8 per cent to $41.12 per barrel.
Prices of crude had hit their best in more than two months this week following news about progress on coronavirus vaccine, but IEA said yesterday that the use of fuel won’t experience any significant boost from vaccines until the second half of next year.
The Paris-based organisation, which advises most major economies, reduced oil-demand projections for this quarter sharply, by 1.2 million barrels a day.
Global oil consumption is now on track to slump by 8.8 million barrels per day this year, averaging 91.3 million a day, according to the IEA. It also reduced estimates for 2021, lowering its first-quarter projection by 700,000 barrels a day, though demand is still set to stage a rebound of 5.8 million barrels on average next year.
Earlier, the Organisation of the Petroleum Exporting Countries (OPEC) had said it expects world oil demand to contract by around 9.8 million barrels per day in 2020, reflecting a downward revision of 300,000 barrels from October’s forecast.
The OPEC+ alliance led by Saudi Arabia and Russia had initially aimed to restore some of the supply they’re keeping offline at the start of next year, but is increasingly focused on delaying the move as the outlook for consumption, combined with rising supply in places like Libya puts pressure on the cartel and its allies as they prepare to meet in a few weeks.
The IEA in its report also noted that if OPEC+ proceeds with its scheduled supply increase of almost 2 million barrels a day in January, the producers will fail to cut global oil inventories during the first quarter.
The agency noted that world output could be 1 million barrels a day higher this month as the US recovers from hurricane disruptions and as Libya resumes exports.
Libya, one of the three OPEC nations exempt from the agreement to cut output, tripled production and is now pumping more than 1 million barrels a day, and could average just below this level in November.
Also adding to the bearish outcome was news that American’s crude inventories increased by 4.28 million barrels last week, according to the Energy Information Administration (EIA).
