IEA downgrades oil demand outlook due to worsening progress of COVID-19 pandemic
IEA slashes oil demand estimate for 2H 2021 by more than 500k bpd
This is pretty much a reflection on oil market sentiment, as we have already seen prices retreat at the start of August to a low near $65 on Monday.
- Sees global oil demand rising 5.3 mil bpd in 2021, further 3.2 mil bpd in 2022
- New COVID-19 restrictions, particularly in Asia, set to reduce oil usage
- Recovery in refinery activity slowed in July due to new COVID-19 waves
- Supply boost, slower demand growth stamps out lingering suggestions of a super-cycle in the oil market
- Oil market could tilt into surplus if OPEC+ continues to undo cuts, with last month's deal going a long way to restore market balance
Despite the double-bottom pattern suggesting a material rebound from a technical perspective, the risk highlighted above needs to be taken into consideration as it is a big change to the fundamental outlook for oil - even if in the short-term.
I've argued previously this week that the situation makes for dip buying targets to be more shallow, with perhaps the 50.0 retracement level of the recent fall @ $69.69 and $70.00 providing stiffer resistance to any upside momentum for now.