Oil 11
Oil demand is likely to record its biggest ever decline through the rest of the year. Even massive production cuts are yet to help stabilise demand. Image Credit: Reuters

Abu Dhabi: Global demand for oil is yet to show a pick up – latest estimates reckon that it would drop by about 8.1 million barrels a day through the rest of the year – the biggest decline in the commodity’s history.

This is despite demand having actually risen by 500,000 barrels a day due to economies emerging from lockdown.

“In China, oil demand recovered fast in March-April and India’s demand rose sharply in May,” said International Energy Agency in its latest outlook.

The updated numbers highlight the oil market’s gradual recovery over the last three months, which saw prices hit historic lows back in April.

“If recent trends in production are maintained and demand does recover, the market will be on a more stable footing by the end of the second-half [of the year],” the report notes. “However, we should not underestimate the enormous uncertainties.”

Production cuts

Massive production cuts by Opec+ along with the easing of lockdown measures has seen prices steadily moving up. The benchmark Brent crude was trading at $39.83 with West Texas Intermediate (WTI) on $37.11 during the early UAE afternoon hours.

And yet, “Global oil supply is set to tumble by a massive 7.2 million bpd on average in 2020, and stage only a 1.8 million bpd increase in 2021 assuming 100 per cent compliance with Opec+ cuts,” the IEA said

“The recent improvement in oil prices that saw WTI trading for a few days close to $40 is not enough to allow a significant increase in US output, which in June is estimated to have fallen to 10.5 million bpd.”