Home Forex Crude Oil Prices Vulnerable Amid Fading Demand, Oversupply Concerns

Crude Oil Prices Vulnerable Amid Fading Demand, Oversupply Concerns

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Oil Basic Forecast: Bearish

  • Saudi Vitality Minister’s warning to short-sellers could quickly underpin crude oil prices.
  • Fading demand and oversupply issues suggests that the longer-term path for WTI crude oil is decrease.

The strict warning from Saudi Arabia’s Vitality Minister Prince Abdulaziz bin Salman that “I’m going to ensure whoever gambles on this market will likely be ouching like hell” might fall on deaf ears, as fading world demand – within the wake of a ‘second wave’ of coronavirus infections – counsel crude oil is prone to reversing decrease.

That being mentioned, Prince Abdulaziz seems hell-bent on supporting oil costs, lambasting these OPEC+ members who skirted cartel-imposed manufacturing quotas and stating that “makes an attempt to outsmart the market is not going to succeed and are counterproductive when we have now the eyes, and the know-how, of the world upon us”.

Nonetheless, these feedback could fail to counterbalance the drastic discount in demand anticipated by the Worldwide Vitality Company (IEA), with the Paris-based intergovernmental group anticipating “the restoration in oil demand to decelerate markedly within the second half of 2020” and including that “the trail forward is treacherous amid surging Covid-19 circumstances in lots of components of the world.

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Crude Oil Storage

Information Supply – Bloomberg

Furthermore, with OPEC’s Month-to-month Oil Market Report (MOMR) for September revising down demand for OPEC crude in 2020 “by 0.7 mb/d from the earlier month to face at 22.6 mb/d, which is round 6.7 mb/d decrease than in 2019”, it appears comparatively unlikely that oil costs will revisit the post-crisis highs above $50 anytime quickly.

Moreover, each authorities foresee a big provide glut within the subsequent 12 months, with the IEA forecasting that world oil inventories on the finish of 2021 may very well be over 100 million barrels greater than the degrees seen in 2019. OPEC surprisingly extra pessimistic in its prediction and foreseeing world oil shares nearly 500 million barrels above 2019 ranges.

To that finish, though Prince Abdulazziz’s hints at additional manufacturing cuts could quickly buoy crude oil costs, the basic backdrop of falling demand and rising provide suggests the longer-term path for the heavily-traded commodity is to the draw back.

OPEC Crude Production

— Written by Daniel Moss, Analyst for DailyFX

Observe me on Twitter @DanielGMoss

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