Oil inventories to decline, oil prices to rise in 2H2020

Oil&Gas Materials 9 June 2020 23:04 (UTC +04:00)

BAKU, Azerbaijan, June 9

By Leman Zeynalova - Trend:

Daily Brent crude oil spot prices averaged $29 per barrel (b) in May, up $11/b from the average in April, Trend reports citing the Short-Term Energy Outlook (STEO) of the US Energy Information Administration.

Oil prices rose in May as initial data show global oil demand was higher than EIA had forecast and as adherence to announced production cuts by Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+) was high.

EIA expects monthly Brent prices will average $37/b during the second half of 2020 and rise to an average of $48/b in 2021.

The forecast of rising crude oil prices reflects expected declines in global oil inventories during the second half of 2020 and through 2021.

EIA expects high inventory levels and spare crude oil production capacity will limit upward price pressures in the coming months, but as inventories decline into 2021, those upward price pressures will increase.

The average daily settlement price for Brent front-month futures contracts increased by 22 percent from April to May, the largest percentage increase for any month since March 1999, said EIA.

However, even with this increase, prices remain significantly lower than the first-quarter 2020 average, reads the report.

“Several factors likely provided support to crude oil prices. Initial oil consumption data and additional efforts by major oil producers indicate that the oversupply in global oil markets has not been as severe as EIA had forecast in the May STEO,” said the EIA.

As U.S. states and countries in the Organization of Economic Cooperation and Development (OECD) began to reopen from lockdown, early indicators of petroleum consumption have shown increases from the low April levels.

EIA estimates that the global consumption of petroleum and other liquid fuels averaged 82.9 million barrels per day (b/d) in May, up 3.7 million b/d from April consumption and 2.9 million b/d more than forecast in the May STEO.