Daily Management Review

Global Oil Market Caught In No Major Slowdown But Stalled Recovery Says IEA


Global Oil Market Caught In No Major Slowdown But Stalled Recovery Says IEA
There is likely not going to be any major slowdown in the global economy because of the novel coronavirus pandemic but the chance of oil market’s recovery is clouded by the  piled-up storage and uncertainty over China’s oil demand, believes the International Energy Agency (IEA) as stated by an official of the organization.
The forecast and outlook for the global oil market w clouded by either a second wave or a steady first wave of the coronavirus, said Keisuke Sadamori, IEA director for energy markets and security.
“There is an enormous amount of uncertainty, but we don’t expect any additional serious slowdown in the coming months,” Sadamori said.
“Even though (the market is) not expecting real robust growth coming back soon, the view on demand is more stable compared with three months ago,” he said in an interview to the media.
With the pandemic c rushing demand for oil pushed crude prices LCOc1 CLc1 to historic lows in the spring and there have been losses, despite which the prices have managed to hold steady near $40 a barrel.
Warning that the reduction of air travel would lower global oil demand by 8.1 million barrels per day (bpd), in its monthly report on August 13, the IEA cut its 2020 oil demand forecast.
With the Covid-19 pandemic still raging through many countries and their economies with economic pain and job losses the world over, its outlook for the global oil industry was downgraded for the first time in three months by the Paris-based agency.
The prospect of demand for crude going down or remaining the same in addition to low margins in refining crude and slow economic growth pushed Brent crude to record its first weekly loss since June on Friday. That has reduced the incentives to draw crude and products from already existing abundant stocks.
“It doesn’t seem like a massive stock draw seems to be happening yet,” Sadamori said. “We are not seeing a robust pickup in refining activity, and jet fuel is the big problem,” he added.
Compared to other countries, China, the largest crude importer of the world, has managed to emerge from the economic hit of the pandemic and the use of its financial muscle to make record oil imports in recent months which marked a rare bright spot amid the rout in global oil demand and consequently prices.
But Sadamori said that there can be doubts “to what extent it can be sustainable and last long” because of geopolitical tensions.
“There are so many uncertainties with regard to the Chinese economy and their relationship with key industrialized countries, with the U.S. and these days, even Europe. It’s not such an optimistic situation - that casts some shadow over the growth outlook”.