BAKU, Azerbaijan, Sept.10
By Leman Zeynalova – Trend:
Surplus crude oil production capacity will limit upward pressure on oil prices, Trend reports with reference to the US Energy Information Administration’s (EIA) in September Short-term Energy Outlook (STEO).
“Brent crude oil spot prices averaged $45 per barrel (b) in August, up $2/b from the average in July. Brent prices in August were up $26/b from the multiyear low monthly average price in April. The increase in oil prices has occurred as EIA estimates global oil markets have shifted from global liquid fuels inventories building at a rate of 7.2 million barrels per day (b/d) in the second quarter to drawing at a rate of 3.7 million b/d in the third quarter.
“Brent crude oil prices increased for the fourth-consecutive month, driven by continued increases in global oil consumption amid reduced oil supply. As of the end of August, oil prices had moved into an increasingly narrow trading range with some of the lowest levels of price volatility since 2015. Although considerable uncertainty in the global economy and oil markets remains, price volatility may have declined primarily as a result of the large volume of oil inventories accumulated during the first half of 2020 and a slowing rate of oil consumption growth. EIA estimates that total commercial petroleum inventories in the Organization for Economic Cooperation and Development (OECD) as of the end of August 2020 were sufficient to meet 71 days of current OECD oil demand, compared with 63 days on average for August over the past five years (2015–19). However, crude oil prices fell on September 4 and 8, breaking out of the narrow trading range amid heightened volatility.
“EIA expects inventory draws in the fourth quarter of 3.1 million b/d before markets become relatively balanced in 2021, with forecast draws of 0.3 million b/d. Despite expected inventory draws in the coming months, EIA expects high inventory levels and surplus crude oil production capacity will limit upward pressure on oil prices. EIA forecasts monthly Brent spot prices will average $44/b during the fourth quarter of 2020 and rise to an average of $49/b in 2021 as oil markets become more balanced,” reads the report.
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