IEA Cuts 2020 Oil Demand Outlook
September 16, 2020
Bloomberg reports that Vitol Group said inventories have been falling sharply and will continue to decline this year. Trafigura Group said the market will go back into a surplus. Both companies forecast demand to slow down and for the next few months to see increased volatility and then demand will begin a gradual recovery next year. These are two of the world largest oil trading companies and they have a little different perspective. Most see the recovery next year and trader will continue to watch inventories as the indication of how things are progressing. If inventories continue to decline this will support prices over the longer term. Less capital spent to explore, find, and get oil out of the ground brought on by low prices as the result of the pandemic will ultimately over the long run set up the next boom cycle.
According to Bloomberg the global stockpile growth peaked at 1.2 billion barrels early this summer. Since that time inventories have been draw down by roughly 300 million barrels. Vitol estimates they should fall by another 250 to 300 million during these last four months of the year.
The API inventory report said that crude oil stocks were down 9.5 million barrels and Cushing crude stocks down 798,000 barrels. Gasoline stocks had a surprise build of 3.8 million barrels. Distillate supplies were down 1.1 million barrels.
The Bloomberg estimates for today’s DOE inventory report are for crude to be up 1.448 million barrels. Gasoline stocks down 677,000 barrels and distillates down 31,000 barrels.
The average estimates for the propane inventory report this morning is for stock to be up 1.3 million barrels.
The Fed is expected to outline their plan on how to support the economy later today, as well as, release new economic projections. This could offer some support to energy markets.
Due to Hurricane Sally, Gulf of Mexico offshore platforms have shut down 26.9% of oil and 28% of natural gas production according to the Bureau of Safety and Environmental Enforcement.
The International Energy Agency cut its 2020 outlook for oil demand by 200,000 bpd in its monthly report. The IEA cautioned about the pace of the world economic recovery from the pandemic and said that they expect the second half of 2020 to decelerate with most of the easy gains already achieved.