- Crude futures slip as oversupply and demand concerns resurface.
- Market concerns have prevailed over the inadequacy of the recent OPEC+ deal to balance out the sharp decline in oil demand.
- Platts sees 2020 global oil demand contracting in its March outlook.
Crude oil futures were lower in mid-morning trade in Asia Monday as oversupply concerns and doubts of demand recovery take center stage again, writes Jeslyn Lerh for Platts.
At 10:15 am Singapore time (0215 GMT), ICE Brent June crude futures fell 26 cents/b (0.93%) from Friday’s settle to $27.82/b, while the NYMEX May light sweet crude contract was $2.66/b (14.56%) lower at $15.61/b.
Oversupply concerns
The sharp decline in front-month WTI continues, after having settled at a fresh 18-year low Friday as near-term oversupply concerns prompted selling of prompt-dated contracts.
Market concerns have prevailed over the inadequacy of the recent OPEC+ deal to balance out the sharp decline in oil demand after the COVID-19 outbreak.
“Brent [has] closed below $30/b since last Tuesday, as fears of oversupply in the market have resurfaced to render the OPEC+ cuts ineffective,” OCBC analysts said.
The analysts added, “We maintain our view that oil prices are expected to face selling pressure until the coronavirus episode shows stronger signs of stabilization.”
Global oil demand dwindles
While more countries are looking to gradually reopen businesses and ease lockdown measures, demand recovery remains capped.
S&P Global Platts Analytics now sees 2020 global oil demand contracting by 7.8 million b/d compared with a 4.5 million b/d decrease in its March outlook. In contrast, the latest OPEC+ agreement will only be reining in 9.7 million b/d of crude oil production for May and June.
“It hasn’t taken long for the market to recognize that the OPEC+ deal will not, in its present form, be enough to balance oil markets,” AxiCorp’s chief market strategist Stephen Innes said in a note.
“Brent cargoes are also trading at huge discounts as no one wants to take delivery, given the price of storage could effectively be more expensive than oil prices when dealt with end-users,” Innes added.
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Source: Platts
