The sluggish global oil demand recovery is putting off the point of oil market rebalancing and adding downward pressure on oil prices. At the end of the first half of 2020 in June, many analysts and experts predicted that the global oil supply-demand balance would be in a sharp supply deficit in the third and fourth quarters this year.
While there have been inventory drawdowns in recent weeks, including in the world’s most visible market, the United States, demand has failed to recover as much as analysts had predicted two months ago.
Combined with OPEC+ group’s struggles on the supply side to rein in laggards in compliance who continue to overproduce above their quotas, oil prices have struggled to break above the low $40s amid those bearish fundamentals.
Over the past month, analysts, OPEC, and the International Energy Agency (IEA) admitted that their earlier forecasts of global oil demand this year may have been too optimistic. Both the IEA and OPEC revised down their oil demand forecasts in their respective reports in August, pointing to still struggling fuel demand and continued high uncertainty about the pandemic’s impact on economies and mobility.
The OPEC+ cuts may have stabilized oil prices, but the slower-than-expected oil demand recovery continues to weigh on prices and market sentiment.
Last updated on Sep 06, 2020.