What appeared to be a strong recovery in the demand for crude oil suddenly reversed course in July, as the spreading Covid-19 delta variant threatens to derail robust consumption and mobility.
The International Energy Agency sharply downgraded its global oil demand forecast for the remainder of the year on Thursday, as a resurgence of the pandemic hits major crude-consuming economies. The agency said that demand slumped by 120,000 barrels per day last month, and is now anticipating consumption to decline by around 550,000 barrels per day in the second half of 2021.
Just a month ago, the Paris-based agency urged OPEC+ to boost output in an effort to curb the rising costs of fuel, to which the oil cartel obliged. However, the increase in output is now arriving just as consumption begins to slacken.
The IEA’s latest forecast also contradicts a call from the White House to OPEC and its members to further accelerate output in wake of rising fuel prices across the US. “The immediate boost from OPEC+ is colliding with slower demand growth and higher output from outside the alliance, stamping out lingering suggestions of a near-term supply crunch or super cycle,” explained the agency.
Since the beginning of August, oil prices have fallen by more than 5%, as the rapid spread of the delta variant spurs new lockdowns in China and other Asian regions. The “recent rally has lost steam on concerns that a surge in COVID-19 cases from the Delta variant could derail the recovery just as more barrels hit the market,” the IEA said.
Information for this briefing was found via the IEA. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.