— This is the script of CNBC's news report for China's CCTV on July 16, 2020, Thursday.
We know that global oil demand fell by almost a third earlier this year, hit by the COVID-19 outbreak. In an effort to stabilize prices,OPEC+ implemented a 9.7 million barrels a day (b/d) cut, or about 10 percent of global supply, starting in May.
From August through December,OPEC+ 's official production cut will shrink by 2 million barrels to 7.7 million barrels. However, the Saudi energy minister said the actual reduction was likely to be much greater. Countries that overproduce because they did not meet their commitments in May and June will need to make up in August and September. So the actual average production cut is likely to be around 8.1 to 8.3 million barrels a day.
That way, the overall change will be smaller. And demand for crude oil has picked up as economies in some parts of the world recover, so, the overall market impact will be limited. Brent in London and WTI in the United States were both slightly higher in Wednesday's trading, although the scale of OPEC+ 's output cuts will weigh on prices to some extent.
The main support came from data from the Energy Information Administration showing U.S. crude oil inventories fell 7.5 million barrels last week, well above the 2.1 million barrels expected by analysts polled by Reuters, in a sign of recovery on the demand side. In fact, Brent oil prices have been around the level of US$40-45/barrel for about five weeks, which means that the crude oil market has recovered significantly from the lows in March.
Prince Abdulaziz bin Salman
Saudi Arabia's Energy Minister
as we move to the next phase of the agreement, the extra supply resulting from the scheduled easing of the production cut, will be consumed as demand continues on its recovery path. in addition, seasonality is even more pronounced this year due to the pandemic, and many opec+ countries there will be increase in demand for utilities and changes in travel patterns posting a domestic demand for gasoline and diesel
However, it is worth pointing out that the international oil price is still at correction, and there is still about 30% decline since the beginning of this year.
And according to OPEC's expectations, international crude oil demand will not fully recover to pre-epidemic levels by the end of next year. Given the recent resurgence of epidemic data in some regions and the reopening of business activity, the uncertainty on the demand side of crude oil is even greater. The epidemic is also the biggest risk factor in the current oil market.
Currently, on the one hand, relatively weak demand is not enough to support individual economies; On the other hand, at a price level of US$40-45/barrel, US shale oil companies can barely survive.
Head of Energy News EMEA, S&P Global Platts
You know I think it's the demand is the key issue here. That's car crash let's face it,
They (OPEC) are in this horrible kind of grey area of, they can't pump up prices enough to support their own economies, they do need to bring more oil back on the market, they need the market to respond. And with these prices, it's just not going to cut it. It's a bleak picture.
We will also keep a close eye on any further moves from OPEC and crude oil prices.