IEA slashes oil demand forecast as fresh lockdowns temper with the recovery outlook in Q1
- Lowers global oil demand forecast by 600k bpd for Q1
- Lowers global oil demand forecast by 300k bpd for 2021 as a whole
- Global oil demand expected to recover by 5.5 million bpd still this year
- Global oil supply set to rise by more than 1 million bpd in 2021
- This follows a 6.6 million bpd drop in 2020
- There may be scope for higher supply growth given expected 2H 2021 demand improvement
I don’t think this comes as too much of a surprise given the way things have started off this year, with lockdowns still prevailing in Europe and some parts of the world.
The fear is that the vaccine timeline runs into trouble and tighter restrictions may still be needed in Q2 or perhaps even Q3 if things go awry in the coming months.
That will temper with the oil outlook further, although prices are not really all too shaken up as the market continues to keep with the reflation narrative for the time being.
Bloomberg with the report that Saudi Aramco will supply less crude as part of long-term contracts next month
Some Asian processors will receive as much as 20%-30% less than they had sought
The newswire citing company officials who received the notices but asked not to be identified.
Goldman Sachs (Global Investment Research piece) projections for gold this year ahead, for various time horizons:
- 3 months view: $2300
- 6 months: $2300
- 12: months $2300
Bizarre …. up then sideways???
- 3 months view: $45
- 6 months: $49
- 12: months $61
Draft statement released (update: Saudis to cut “in excess” of 400,000 bpd in Feb/March)
The OPEC+ agreement is that Russia will be allowed to raise production by 65K bpd and Kazakhstan by 10K bpd in each month.
We don’t know yet what cut Saudi Arabia is offering but they may take on that same amount. The net would be unchanged production through March, which is a big win for the global oil market when the baseline was a 1 mbpd increase over that timeframe.
I’d warn again that number isn’t in the statement so we’ll have to wait for a separate comment from Saudi Arabia. Update: Saudis to cut “in excess” of 400,000 bpd in Feb/March, according to Reuters.
At the same time, you have to frame that against increasing lockdowns and the growing threat of further lockdowns from here.
Still, we get two months of certainty before the March meeting and that takes some headlines risk out of the oil market.
It’s make-or-break time for crude. I’m betting on a break but $50 needs to give way.
Oil higher on the report
Iran oil journalist Reza Zandi reports:
An informed source just told me that it appears that Russia has agreed that there won’t be any increase of 500 thousand bpd for the month of February, but, not the cessation of increase for the month of March.
If Iran can somehow enter the market in February, the situation for the month of March will be complicated
WTI is at the highs of the day, up $1.07 to $48.69.
The OPEC meeting gets back underway at the bottom of the hour.
Update: Another more-mainstream report is now saying the same thing and oil has risen further, to $49.00.
The Monday meeting dragged on until it was clear there would be no conclusion, so it is to continue Tuesday.
Adam had the heads up earlier:
- OPEC to extend meeting until tomorrow – will start at 15:30 Vienna time.
The long story short is the two big players:
- Saudi Arabia argued against more output citing demand drop from new lockdowns
- Russia led calls for higher production, citing recovering demand
Crude unchanged after earlier jump
Brent hit $53.33 and WTI rose to $49.83 earlier but both have given back about $1.40 and are unchanged on the day.
OPEC+ is meeting today to decide whether to stick with the plan of returning another 500,000 barrels per day of production to the market in light of fresh lockdowns and the virus surge.
One report, citing a source close to the talks said just before today’s meeting that Russia and UAE are insisting on the 500 thousand bpd increase in production but Saudi Arabia, Kuwait and Algeria are pushing to leave production unchanged.
The baseline in the market is for an increase but another report says there is “lots of chatter” about keeping current production levels.
In the bigger picture, 26 of the 29 commodities in the CRB index are higher today with coffee, aluminum and nickel as the only laggards. On top are silver and natural gas.