The Shell Deer Park oil refinery in Texas
The Shell Deer Park oil refinery in Texas. Despite worries of a second COVID-19 outbreak, oil prices continue to maintain their stable footing, with prices trading in the low $40 range as demand ticks up. Image Credit: AP

Abu Dhabi: Despite worries of a second COVID-19 outbreak, oil prices continue to maintain their stable footing, with prices trading in the low $40 range as demand ticks up on global economies reopening.

Global benchmark Brent crude saw its price closing at $43.24 on Friday, with West Texas Intermediate (WTI) on $40.55. And in positive news for oil markets, the International Energy Agency (IEA) in its latest monthly oil report improved its forecast for oil demand, with demand set to drop by 7.9 million barrels per day (bdp) this year, compared to the 8.1 million bpd in its last report.

“The potential a of a viral relapse into lockdown conditions is a major risk to the sustainability of oil prices around their current levels, not to mention a drag on them pushing significantly higher,” said Edward Bell, commodity analyst at Emirates NBD.

Oil markets this week will also be keeping a close eye on the Opec+ joint market monitoring committee (JMMC) meeting, which will decide on whether to keep the current round of existing cuts or to start easing off and bringing more production back into the market.

“Opec+ countries would add more than 2 million bpd to markets in August, assuming the JMMC endorses the increase,” said Bell. “We have assumed that Opec+ countries stick to their targets fully for 2020-21 and the increase in levels won’t be enough to push the market into surplus, provided demand recovers as strongly as the IEA assumes,” he added.

Ole Hanson, head of commodity strategy at Saxo Bank, said that oil prices would most likely remain in the mid $30s to the mid $40s range in the third quarter of 2020, with the market unlikely to find support for pushing higher.

“The recent strong growth in COVID-19 cases has cast a shadow over the (IEA) outlook, thereby putting at risk the market anticipation of a transformation in the oil market from a substantial surplus in 1H (first half of 2020) to a deficit in 2H.”