The story with the recent snap-back in oil is the fact that demand keeps coming back faster than expectations. The Wall Street Journal points out that, “US crude’s 94% advance this quarter puts oil on track for its most significant quarterly percentage gain in 30 years.” Fears that the COVID-19 shutdowns would keep oil demand down for years is proving not to be true.
Now an official from the International Monetary Fund is saying that they expect that oil will average $40 to $50 a barrel this year. Stocks and oil demand have come back faster than anticipated, and even an uptick in US coronavirus infections should not stop the global trend of rising demand. China’s market is back to previous levels, and it was reported that China’s crude oil imports jumped 19.2% on the year to an all-time high at 11.34 million b/d, or 47.97 million mt. India, the third-largest oil consumer, also sees demand coming back faster than the trade expected.
Bloomberg reported that India, the third-biggest oil consumer, expects fuel demand to return to normal earlier than projections by the International Energy Agency and OPEC. “If you look at the trend of the past few weeks, I’m confident that by the end of the second quarter, demand will be as usual,” India’s Oil Minister Dharmendra Pradhan said at the Bloomberg NEF summit, referring to the quarter ending September. “At the end of June, we have already achieved 85% of our demand compared to June 2019.”
Low prices and help with OPEC+ production cuts have put the market closer to balance and even with the talk of a return of Libyan oil, should not stop the normalization of the global oil market. Compliance is critical and Russia and Saudi Arabia continue to press OPEC laggards into full compliance. It seems to be working as we see better agreement from Iraq and Nigeria.
Reuters reports OPEC has cut oil output in June by 1.25 million barrels per day (bpd) from May levels as it works to implement a supply restraint agreement with Russia and other allies, according to estimates from tanker-tracking company Petro-Logistics. OPEC and its allies, a group is known as OPEC+, agreed to cut supply by a record 9.7 million bpd from May 1 to offset an oil price and demand slump triggered by the coronavirus crisis.
OPEC’s share of the cut is 6.084 million bpd. “Excluding Iran, Libya, and Venezuela, which are not part of the curtailment agreement, OPEC-10 supply remains about 1.55 million bpd away from full compliance,” Petro-Logistics said in an email. Iraq, Nigeria and Kuwait are the main countries that have lowered their supply since May, with more limited cuts by Saudi Arabia, the UAE, and Angola.”
The pressure continues. Reports say that Saudi Crown Prince Mohammed bin Salman, in a phone call with Nigerian president Muhammadu Buhar, discussed the OPEC plus pact and issues relating to compliance. Yet Covid 19 worries remain.
Reports of summer brought natural gas back from the lowest price since August 1995! Summer! Air Conditioning Demand! Cheap gas! Life is good.