By Adedapo Adesanya
Crude prices fell on Thursday as new data showed that world oil demand will fall more steeply in 2020, worsening outlook for the commodity.
Brent crude futures fell 37 cents or 0.81 per cent to trade at $45.06 per barrel and US West Texas Intermediate (WTI) crude futures dropped 43 cents or 1.01 per cent to $42.24 per barrel.
In the new report released on Thursday, the International Energy Agency (IEA) lowered its 2020 oil demand forecast following unprecedented travel restrictions.
According to the Paris-based agency, because of the COVID-19 pandemic, there would be lower global oil consumption this year by 8.1 million barrels per day.
Oil prices have collapsed as the coronavirus curtailed travel and economic activity. While some countries have eased lockdowns, allowing demand to recover, fear of new outbreaks has kept a lid on prices and experts expects this to persist.
The day before, the Organisation of the Petroleum Exporting Countries (OPEC) said that world oil demand will fall by 9.06 million barrels this year, more than the 8.95 million barrels decline expected a month ago.
Although the market didn’t immediately react to the news with a combination of IEA’s forecast, prices went down. However, this doesn’t look like it will hold on for long as investors are holding out for progress in a US stimulus deal that will help economic activities in the largest economy in the world.
Investors are also looking at the US Dollar which fell to its lowest in a week against a basket of currencies on Thursday. Normally, a weaker dollar makes oil cheaper for holders of foreign currencies and this might support prices.
Also, there are pointers that a positive outcome in a high-level talk between the US and China on August 15 with the aim of assessing compliance by China with respect to a bilateral trade agreement signed earlier in 2020 will bring good news to the market.
Following reports that US commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 4.5 million barrels from the previous week, it may signify reflection of a gradual improvement in global oil demand.
