Asian consumers, who normally welcome rising Middle East crude oil supply, have barely taken notice as they grapple with crippling demand and high stocks, and it remains to be seen where all this excess oil will eventually end up.
il prices have been stuck in a narrow range for the last six weeks and further upside looks limited amid rising supply as OPEC+ pares back its production cuts and demand sees an unexpected slowdown led by a resurgence in COVID-19 cases.
“Oil markets continue to find themselves in ‘No-Man’s Land’, not low enough to trigger production cuts but neither strong enough to pull barrels from storage,” Chris Midgley, global director of analytics at S&P Global Platts Analytics, said.
Secondary lockdowns in the United States and weaker demand in China and India saw global demand falter in July, growing just 1.2 million barrels per day after strong month-on-month growth of nearly 6 million b/d in May and 5.6 million b/d in June, according to Platts Analytics.
The physical oil market faces several headwinds. Supply is on the rise, demand growth faces a slowdown, stocks are high, Chinese buying is set to slow, and global oil refining is heading into maintenance season, Midgley said.
Platts Analytics sees Dated Brent prices at around US$40/barrel for the remainder of the third quarter.
After dropping by 13 million b/d from April to June, global oil supply is now starting to recover with the return of shut-in barrels, the unwinding of Saudi Arabia’s over-compliance in July, and the OPEC+ agreement to taper production cuts.
Global oil supply is on track to increase by 4.5 million b/d through July and August, and another 3 million b/d by end-2020, according to Platts Analytics.
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