IEA lowers 2020-21 oil demand prediction after fresh surge in COVID-19 cases

The oil market slipped yesterday after the International Energy Agency (IEA) lowered its demand prediction for the rest of the year and 2021, based on a surge in new cases of COVID-19 globally.

In its latest monthly report, the energy body reduced its 2020 demand forecast by 140,000 barrels of oil to 91.9 million barrels per day (bpd) and wiped 240,000 barrels from its 2021 outlook, citing reduced air travel due to the pandemic.

Following the publication, Brent crude ended 1% down at US$44.96 a barrel, and West Texas Intermediate fell by 1%, to $42.24 a barrel. The current prices are a far cry from the 21-year lows of $16 a barrel in April, but still the $64 oil was trading at in the first month of the year.

During the nadir of the demand collapse, the world’s largest oil producers – represented by OPEC and its allies – agreed to record production cuts to boost prices throughout the summer months.

However, the IEA said oil supplies rose by 2.5 million bpd last month after Saudi Arabia ended its voluntary production cut of 1 million barrels and the United Arab Emirates exceeded the target set by the historic Opec+ agreement.

The IEA added that US oil production has also started to recover, raising the prospect of the market heading into oversupply again.