Economic recovery to boost crude oil demand in 3Q/4Q 2020 KUALA LUMPUR (April 15): Demand for crude oil is expected to pick up in the third and fourth quarters this year reaching up to 90 million barrels per day in line with the global economic recovery, said an analyst.
Juwai IQI chief economist Shan Saeed said at present the demand is lower due to the global lockdown and softening demand in the energy market, as countries ban people from travelling to prevent the COVID-19 disease from spreading.
Today, benchmark Brent crude oil is trading at US$28.27 per barrel, down by 4.49 percent, with demand at 30 million barrels per day.
“The recent production cuts by the Organisation of Petroleum Exporting Countries (OPEC) and OPEC++ have heralded a new era of normalcy to the energy market.
“Oil prices have dropped 53 percent since Feb 24, so the recent action will likely send oil prices to move between US$30 and US$40 per barrel,” he told Bernama.
Shan said he foresees further production cuts going forward, which could move prices up to between US$47 and US$59 per barrel, premised on a weaker US dollar and geopolitical risks, among others.
“Production cuts help stabilise the oil market,” he said, adding that crude oil demand would touch 102 million barrels per day by the first quarter of 2021.
“The global economy is going to rebound and most of the energy demand will be coming from Asia. Asia is the future and is going to lead the global economic growth outlook," he said.
Meanwhile, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said it remains to be seen whether the 9.7 million barrels per day cut by OPEC and its allies could provide a strong lift to the prevailing prices beyond US$40 per barrel on a sustained basis.
“Global oil demand is expected to fall by 90,000 barrels per day this year, the first decline since 2009, according to the International Energy Agency (IEA),” he said.
Mohd Afzanizam said last year, more than 80 percent of global oil demand growth was contributed by China.
Based on the latest International Monetary Fund forecast, China is expected to grow by a minuscule rate of 1.2 percent in 2020. It’s highly uncertain whether the current oil supply cut arrangement would materially help to stabilise the oil prices, he cautioned.
Earlier today, Malaysia announced its decision to cut crude oil production by 136,000 barrels per day for May and June.
Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed was reported as saying in an interview with Reuters that the country welcomes the supply reduction agreement between OPEC members and allies, saying it would stabilise the global oil market and ensure supply security for consumers.
To recap, OPEC and allies led by Russia agreed on Sunday to a record cut in output to prop up oil prices amid the coronavirus pandemic in an unprecedented deal with fellow oil nations, including the United States, that could curb global oil supply by up to 20 percent.
Although it is not an OPEC member, historically the State-owned oil and gas company Petronas has been loyal to the organisation. Petronas reportedly produces between 650,000 to 750,000 barrels of oil per day.
Source: https://www.theedgemarkets.com/article/economic-recovery-boost-crude-oil-demand-3q4q-2020-analyst
Something to support my position and assumptions! vs Emotional Rambling!