By Adedapo Adesanya
Crude oil prices posted close to 2 per cent gains on Friday as the International Energy Agency (IEA) said that the worst of the oil market downturn from the coronavirus pandemic has passed.
Reacting to the news, the international crude benchmark, Brent crude, gained 1.96 per cent or 83 cents to trade at $43.18 per barrel, while the US West Texas Intermediate (WTI) crude was up 2.35 per cent or 93 cents to trade at $40.55 per barrel.
In its latest monthly oil market report, the Paris-based agency raised its estimate for global oil demand by 400,000 barrels per day this year, estimating the demand collapse during the lockdown period in the second quarter was less severe than expected at 16.4 million barrels per day.
Global oil demand in 2020 is now forecast to average 92.1 million barrels per day, down 7.9 million barrels per day compared to 2019, the IEA said.
The IEA said that next year, demand is now forecast to grow by 5.3 million barrels per day to 97.4 million barrels per day unchanged from the IEA’s previous report.
On supply, the IEA said global oil output tumbled to a nine-year low in June after members of the Organisation of the Petroleum Exporting Countries (OPEC) and its allies reduced oil production by 108 per cent compliance against 89 per cent in May.
As a result, global supplies averaged 86.9 million barrels per day in June, down 2.4 million barrels per day month on month and by 13.4 million barrels per day year on year.
Despite these, the fear of COVID-19 resurgence has continued to pull on prices. The US reported a record increase in new coronavirus cases on Friday, while deaths rose by more than 800 for the fourth day in a row.
A further 66,645 people in the US tested positive for coronavirus up from 58,836 on Thursday and about 4,500 more than the previous record on Wednesday.
It is also worrying that the country’s crude inventories leapt by 1.75 million barrels to 545 million barrels.
The inventory build-up floods the market with unwanted oil as demand continues to remain much below pre-virus levels.
Despite the optimistic position presented by the IEA, analysts note that with tanking demand, the problem of oversupply which bothered the market some months ago might make a comeback especially as OPEC+ will soon start tapering cuts.
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