Oil prices down on poor demand and Opec oversupply

Image: 123RF/ PAN DENIM

Oil prices edged lower on Friday but held near a five-month high as easing coronavirus lockdowns aids a slow recovery in fuel demand while major crude producers seek to limit supply.

Brent crude futures were down 27c, or 0.1%, at $44.63 a barrel by 8.50am GMT, heading for a 0.4% weekly decline.

US West Texas Intermediate (WTI) crude futures were down 33c, or 0.8%, at $42.49 but on track for a weekly gain of about 1.1%.

The eurozone's economic recovery from its deepest downturn on record has stuttered in August as the pent-up demand unleashed by easing lockdowns in July has dwindled, a survey showed on Friday.

In another sign of the sluggish nature of recovery, India's crude oil imports fell in July to their lowest since March 2010 amid renewed Covid-19 lockdowns and refinery maintenance.

“An imminent return to higher crude demand [in India] remains doubtful,” Vienna-based consultancy JBC Energy said in a note.

At the same time, oil cartel Opec and allies, including Russia, (Opec+) were focused on ensuring that members who had overproduced against their commitments would reduce their output.

Reuters reported that Opec+ found that some members would need to cut output by 2.31-million barrels per day (bpd) to offset their recent oversupply.

Among Opec members, Iraq and Nigeria were the least compliant and even the United Arab Emirates, which made additional voluntary cuts in June, overproduced by about 50,000 bpd over the May-July period.

The internal report also flagged demand risks, showing that Opec+ expects oil demand in 2020 to fall by 9.1-million bpd, up 100,000 bpd from its previous forecast.

If a prolonged wave of infections hits China, India, Europe and the US in the second half of the year, 2020 demand could fall by 11.2-million bpd, the report added. — Reuters


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