Reasons for oil market weakness.
Earlier this month both the IEA and the OECD reduced their global demand forecasts. The monthly OPEC oil report showed that oil demand growth for OPEC crude was revised down by 700K bpd to 22.6 milk bpd for 2020. The demand growth was revised down even further for 2021 by 1.1mln bpd to 28.2mln bpd. The 2020 demand cut was due to weaker oil demand performance in the sector called 'other Asia', especially India. OPEC says negative impact on oil demand in 'other Asia' is projected to spill over into 1H21 with a slower recovery in transportation fuel demand in the OECD countries.OPEC said risks remain elevated and skewed to the downside, particularly with COVID-19 related risks.
According to Bloomberg there are signs of global demand slowing down. China's buying spree is losing strength. India's demand is slumping with the nation still trying to contain the outbreak, and the bleak outlook for further US stimulus is weakening the consumption expectations for the world's biggest oil consumer. Libya is now moving nearer to re-open their wounded oil industry and Goldman Sachs see around 500K bpd coming back into production by year end. Furthermore, OPEC+ did not discuss the potential of restoring some of their production cuts at last week's meeting.
This means that we can expect US oil sellers on any rallies higher as long as this situation remains.
