Oil prices rise, head for weekly gain

Daniel Fowler
August 14, 2020

Oil held gains near $43 a barrel after closing at a five-month high as US weekly inventory data buoyed optimism that a sustained recovery in energy demand in the world's largest economy is underway.

This week, two prominent forecasters, the International Energy Agency and the Organization of the Petroleum Exporting Countries, trimmed their 2020 oil demand forecasts.

American benchmark West Texas Intermediate was at $42.38 per barrel at the same time, up 0.33% after ending the previous session at $42.24 a barrel.

Brent crude was up 95 cents or 2.1% at US$45.44 a barrel by 11:02 a.m. EDT (1502 GMT), after falling around 1% on Tuesday.

USA crude oil production will drop by an average of 990,000 barrels per day, according to the Energy Information Administration, for an average of 11.26 million bpd.

"We're seeing the demand bounce back", said Phil Flynn, senior energy analyst at Price Futures Group.

Still, the IEA said world markets should tighten during the rest of the year with OPEC nations keeping production limited.

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Meanwhile on the vaccine front and potentially a support to crude prices in the near future, Jens Spahn, health minister of Germany, stated on Thursday that he was "optimistic that in the next months, and certainly in the next year, there can be a vaccine"; also, it was announced that Argentina and Mexico will produce the AstraZeneca vaccine for most of Latin America.

In addition to the reduced outlook for U.S. oil production, the STEO sees high crude inventory levels and excess production capacity as a drag on oil prices in the coming months.

In July, the EIA had forecast that crude oil production in the United States would fall by an average of 620,000 barrels per day for the full year 2020.

By the prediction of OPEC, the global crude oil demand in 2020 might drop around 9 million barrels/day, which was mainly affected by the epidemic outbreak threaten from the beginning of this year.

Still, growing uncertainty over a stalemate in Washington in talks for a stimulus package to support recovery from the deepest impact of the pandemic may weigh on prices looking ahead.

In India, refined fuels consumption fell to 15.68 million tonnes in July, down 11.7 per cent year-on-year and 3.5 per cent below June's levels, data from the Petroleum Planning and Analysis Cell (PPAC) of the Ministry of Petroleum & Natural Gas showed.

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