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For a second consecutive month, the International Energy Agency (IEA) cut on Tuesday its forecast for global oil demand this year, citing an “even more fragile outlook” about the oil market rebalancing.
In its closely-watched Oil Market Report, the IEA said that resurging COVID-19 cases in many countries, resulting in local lockdowns and continued work-from-home, would weigh on oil demand this quarter and next, leading to total world oil demand falling by 8.4 million barrels per day (bpd) in 2020, a downward revision from the 8.1-million-bpd fall expected in the August report.
Last month’s report had also downgraded oil demand estimates, by 140,000 bpd from the previous report—which was the first downgrade in several months, “reflecting the stalling of mobility as the number of Covid-19 cases remains high, and weakness in the aviation sector,” the IEA said in August.
In the report September, the IEA noted that sentiment on the market has weakened while the uncertainty about the pandemic “shows little signs of abating.”
Localized lockdowns in parts of the world and resurging cases in major economies in Europe, such as France and the UK, “weigh heavily on economic activity and lead to lower expectations for a recovery in energy demand,” the IEA said.
“Chinese crude buying – which has provided strong support to the crude market since April - slowed sharply for September and October deliveries leaving unsold barrels piling up. In addition, persistently weak refinery margins provide little incentive to boost crude purchases. Finally, we see that trading houses are once again looking to charter ships to store oil,” the agency said.
Rising global output with eased OPEC+ cuts and expectations of lower demand compared to last month’s estimates suggest that stocks will be drawing at a slower pace than expected.
The estimates from the IEA echoed OPEC’s report from Monday, in which the cartel also downgraded its global oil demand forecast for this year for the second time in a row. OPEC now sees oil demand dropping by 9.5 million bpd this year compared to 2019, as risks with the pandemic and economic activity remains skewed to the downside.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.