Oil prices slipped on Friday morning for a second day in a row as major forecasters warned that the global demand recovery is still fragile and as the U.S. dollar strengthened.
On Thursday, the International Energy Agency (IEA) warned that the oil market rebalancing looks fragile in the first quarter of 2021, although it continues to be optimistic that global oil stocks will rapidly draw down in the second half of this year as demand rises. This year, world oil demand is expected to grow by 5.4 million barrels per day (bpd) compared to 2020, the agency said in its closely-watched Oil Market Report for February. That's 100,000 bpd lower than the projection in the January report when the IEA expected demand to rise by 5.5 million bpd year over year in 2021.
OPEC also warned on Thursday of a weaker start to this year, and expects oil demand to rise by 5.8 million bpd in 2021, down by around 100,000 bpd from last month's projection due to lockdowns in major developed economies in the first half of this year.
Oil prices ended on Thursday their nine-day rally—the longest streak of consecutive daily gains in two years—as the market digested the warnings of weak first-quarter demand and as a growing number of analysts said that technical indicators point to overbought conditions. Related: The Most Fragile Oil Price Rally In History
Torbjörn Törnqvist, chief executive at one of the world's largest independent oil traders, Gunvor, told Bloomberg last week that oil prices were unlikely to soar much above the $60 per barrel mark, considering that this price level would incentivize a lot of oil supply, including from the United States.
Amrita Sen, chief oil analyst at Energy Aspects, doesn't rule out $100 oil next year, but she also believes that in terms of prompt fundamentals, the market has gotten ahead of itself, "because right now demand is still relatively weak."
The current oil price strength is dependent "on continued restraint from the OPEC+ group of producers supported by "paper" demand from speculators," Saxo Bank said early on Friday.
By Tsvetana Paraskova for Oilprice.com
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