At 5 p.m. Tuesday, the IEA released its monthly report, saying the glut will last through 2021 due to tight demand. Specifically, the IEA expects oil demand to fall by 6.2 million b/d in the fourth quarter of 2020 from a year earlier as a result of the new blockade. It also revised growth in 2021 to more than 100,000 b/d, but expects an increase of 5.7 million b/d in 2021.
On the supply side, the IEA expects global oil supply to rise 1.5 million BPD in November as U.S. production recovers from the storm and Libya resumes production. Full-year oil supply will fall by 6.6m b/d in 2020 and rise by 1.4m b/d in 2021.
As for inventories, the IEA expects oil stocks to increase by 17m b/d in 2020, fall by 18m b/d in 2021, and return to pre-outbreak levels by December 2021.
At the same time, the IEA put Opec’s implementation rate at 105 percent in November, compared with 95 percent for non-OPEC members and 96 percent for Russia. So combined, the Opec + implementation rate was 101 percent in November, slightly lower than the 104 percent Opec forecast on Monday.
On Tuesday, British Health Secretary Thomas Hancock declared London a level 3 outbreak alert, and New York City Mayor Bill de Blasio said a complete lockdown was possible in the CITY. Germany, the Netherlands, Italy and other European powers have strengthened blockade measures… The news trumped vaccine news and fears of escalating tensions in the Middle East, with oil prices now wiping out gains made during the day on Monday.
The IEA also said in its monthly report that it would take several months for vaccines to boost global demand and that instability in vaccine supplies would keep oil demand weak in the short term.
Oil prices received some support on Monday after an explosion on an oil tanker in the Saudi port of Jeddah, but the Saudi Energy ministry noted that the incident had not had any impact on supplies. ‘The premium for crude oil has clearly increased following the escalation of tensions in the Middle East,’ said Vivek Dhar, a commodities analyst at Federal Bank.
U.S. shale oil and gas production is expected to fall by about 136,000 b/d in January 2021 to 7.44 million b/d, the lowest level since June, according to the U.S. Energy Information Administration’s monthly forecast released on Monday. Production is expected to decline in almost all seven major reservoirs.
The biggest drop will come from the Permian basin in Texas and New Mexico, where output is expected to fall by about 44,000 b/d to 4.2 m/d, according to the data.
Total US shale oil production is expected to fall for a fourth straight month, the biggest drop since May. However, shale oil production will slowly recover as the number of US oil RIGS and hopes for a quick vaccine launch support oil prices.
Analysts at ANZ said in a report that while the COVID-19 launch had boosted the market, normalising demand was still a difficult road.
Opec also cut its oil demand forecast again in its monthly report just released on Monday, cutting its forecast for a recovery in oil demand by 350,000 b/d in 2021 due to the continuing impact of the outbreak. Opec said recent news about possible vaccination programmes in major economies provided upside for its economic growth forecast for 2021. But when it comes to specific forecasts, the monthly report is more pessimistic.
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