BAKU, Azerbaijan, Aug.5
By Leman Zeynalova – Trend:
Dated Brent will struggle to stay above $40/b for remainder of Q3 as fundamentals face headwinds, S&P Global Platts told Trend.
“Physical markets face headwinds on a fundamental basis. S&P Global Platts Analytics continues to see Dated Brent struggling to stay above $40/b over next couple of months, but rising towards $50/b by end-2021,” said S&P.
The agency said that supply is on the rise, but demand growth faces a slowdown on worsening COVID. “Stocks are bloated, Chinese buying is set to slow, and global oil refining is heading into turnaround season.”
“Global oil supply is on the rise from June lows, but US supply is set to decline and the call on OPEC+ will grow through 2021. Saudi-Russian interactions are key to watch in coming weeks/months, given they have divergent price aspirations. Non-OPEC shut-ins have started to return and OPEC+ agreed to taper production cuts for August. But US supply declines are inevitable and we see growing reliance on OPEC+ barrels. “
S&P believes that global oil supply is forecast down 6.8 million b/d in 2020, up nearly 4 million b/d in 2021.
“OPEC+ is cautiously increasing supply now. Russia is more comfortable at $40-50/b oil while Saudi Arabia likely prefers closer to $60/b, thus Saudi-Russian interactions will be key for oil markets and prices near term. Also watch for rising geopolitical risks through year-end. “
As for demand, S&P said that increasing COVID-19 infections remain a concern which clouds the prospects for 2021.
“We now see total demand in 2021 to be 1.5 million b/d lower than 2019. H1 2020 turned out to be better than expected because of China (May and June), India (June) and Western Europe, but we now see growth in H2 2020 to be slower. Oil demand is forecast to contract by 8.2 million b/d in 2020 on the back of a GDP contraction at 3.7 percent. Looking to 2021, expect global oil demand to grow by 6.7 million b/d, or 7 percent, on GDP growth of 5.5 percent, but the total remains well below 2019 levels.”
---
Follow the author on Twitter: @Lyaman_Zeyn