Oil market recovery remains 'fragile' with Q3 demand set to weaken, IEA says

The Paris-based agency revised down its estimates for the third quarter by 200,000 bpd

FILE PHOTO: The sun sets behind a crude oil pump jack on a drill pad in the Permian Basin in Loving County, Texas, U.S. November 24, 2019. REUTERS/Angus Mordant/File Photo
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Oil market recovery looks “fragile” with demand for the third quarter of 2020 to remain weak, the International Energy Agency said in its latest monthly market outlook.

The Paris-based agency revised down its estimates for the third quarter by 200,000 barrels per day, citing weakness in North America and India, which have registered the highest number of Covid-19 infections.

"This surely raises doubts about the robustness of the anticipated economic recovery and thus the prospects for oil demand growth,” the IEA said in its latest outlook.

The agency left its overall demand estimate for 2020 unchanged at 91.7 million bpd, down 8.4m bpd from 2019. Its estimate for 2021 stands at 97.2m bpd, which is up 5.5m bpd year-on-year.

The forecast echoes Opec’s latest monthly market outlook. The group left its crude demand forecast for 2020 largely unchanged in its latest oil market report. Global oil demand is expected to decline by 9.5m bpd in 2020, with overall consumption expected at 90.3m bpd.

Opec also revised its demand forecast for 2021 down by 80,000 bpd reflecting slower growth for OECD and non-OECD countries. Demand growth for next year is expected at a "solid" 6.5m bpd, said.

The IEA also noted that oil supply for September fell as Opec+ countries improved their compliance with the output restriction pact.

The group is currently drawing back 7.7m bpd from the markets, which is up for review at end of this year.

“Maintenance and unplanned outages curbed output in Brazil, Canada and the North Sea,” the report said.

The IEA on Tuesday said the pandemic may usher in the slowest decade of energy demand in a century and the global response to the coronavirus can reshape the energy landscape for years to come.

The Paris-based agency warned of a fragile recovery for oil markets reeling from the economic impact of the pandemic and urged countries to pursue a transition to cleaner forms of energy.

UAE energy minister Suhail Al Mazrouei said on Tuesday that the producer alliance is expected to continue to increase production incrementally by the end of the year.

The minister said the group is likely to reduce the output cut to 5.7-6m bpd until April 2022.

Opec+ undertook an historic level of production cuts of up to 9.7m bpd between May and July to reverse a record plunge in demand due to the pandemic.