Renewed oil demand weakness led by China and India along with concerns over the persistent challenges of the coronavirus pandemic has raised further questions over the oil market's "fragile rebalancing," the International Energy Agency said Sept. 15 in its monthly report.
The IEA revised down its oil demand outlook by 300,000 b/d for 2020 and now predicts a contraction of 8.4 million b/d, citing renewed concerns around COVID-19. It pointed to the winter in the northern hemisphere as being "unchartered territory" for the virus, along with huge challenges in key demand hubs.
The Paris-based agency said at 91.7 million b/d, demand has returned to its level in 2013 and highlighted India, which has seen a continued upsurge in infections, contributing in August to the biggest month-on-month fall of oil demand there since April.
The IEA noted Chinese crude buying, which has boosted the crude market since the April low, "slowed sharply for September and October deliveries leaving unsold barrels piling up".
The IEA rounded off its bleaker demand picture by outlining weak refinery margins which provide little incentive to boost crude purchases and recent evidence of trading houses once again looking to charter ships to store oil.
SUPPLY SIDE
The agency said that global oil supply recovered 1.1 million b/d in August as the OPEC+ alliance led by Saudi Arabia and Russia eased quotas on its historic production cut deal.
However, the recovery in countries outside the OPEC+ deal stalled in August, with production in the US falling by 400,000 b/d as Hurricane Laura forced precautionary shut-ins, the IEA added.
Total non-OPEC supply is expected to drop by 2.6 million b/d in 2020, before posting a modest 0.5 million b/d rebound next year, the agency said.
"With global output increasing overall, plus our downwardly revised demand data, we now calculate implied stock draws in the second half of the year at about 3.4 mb/d, nearly 1 mb/d less than estimated in last month's report," the IEA said.
