BAKU, Azerbaijan, Aug.19
By Leman Zeynalova – Trend:
During the second half of this year it is likely that world oil demand will exceed supply, Francis Perrin, Senior Fellow at the Policy Center for the New South (PCNS, Rabat) and at the French Institute for International and Strategic Affairs (IRIS, Paris) told Trend.
He pointed out that since the OPEC+ landmark agreement in April 2020 (the agreement was adopted by 23 countries, of which 13 OPEC states.
“Out of these 23 countries 20 are reducing their oil output), which is being implemented since 1 May, the compliance rate has been rather high. It was estimated at 87 percent for May by the Joint Ministerial Monitoring Committee - JMMC) and at 95 percent for June (taking into account the fact that some countries exceeded their production reduction commitments the compliance rate was also estimated at 107 percent for June). For July a figure of around 95 percent is expected. These results since 1 May (three months) are very satisfactory even if it is not perfect. These compliance rates are also very high when compared with OPEC's historical record,” said the expert.
Perrin pointed out that thanks to the very good implementation of the OPEC+ agreement world oil output was very significantly reduced.
“According to the U.S. Energy Information Administration (EIA), part of the U.S. Department of Energy (DOE), world oil supply fell by about 9 million barrels per day between the first and the second quarter of 2020. Apart from 20 OPEC+ countries some other oil states decided to cut their output and U.S. production also fell due to the impact of much lower crude prices on the profitability of the operations of oil companies,” added the analyst.
Perrin pointed out that the oil market suffered from a massive overproduction in the first half of 2020 but the situation is changing a lot.
“During the second half of this year it is likely that world oil demand will exceed supply because of all these production cuts and the restart of the world economy after the huge lockdowns imposed by a lot of governments. World oil demand is on the increase after dramatic falls in the first and second quarters of 2020,” said the expert.
Despite a very likely rise of oil demand in the second half of this year world oil consumption will fall in 2020 because of the weight of the first half, added Perrin.
He noted that world oil demand will probably fall by about 8-9 million b/d in 2020 as compared with 2019 (yearly averages).
“It was about 100 million b/d last year. Oil prices have been rather stable over the past few weeks at about $45/b for North Sea Brent. The major uncertainties about the pandemic, about the future state of the world economy and possible future lockdowns are preventing so far an increase of oil prices towards $50/b or beyond. The rise of oil demand in the second half of this year and the end of the overproduction could authorize a further increase of crude prices by the end of this year. One of the main assumptions behind this scenario is of course the absence of a lot of new national lockdowns,” said the expert.
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