Declining crude inventories cushion oil price fall
18 October, 2020, 14:55
Data from the U.S. Energy Information Administration (EIA) is expected to show crude oil stockpiles moving lower in the latest week, according to analysts polled by Reuters.
Oil prices slid on Friday, dragged down by concerns that a spike in COVID-19 cases in Europe and the United States is curtailing demand in two of the world's biggest fuel consuming regions, while a stronger USA dollar also added to pressure.
"The (EIA) report halted the (price) slide, which was threatening to turn into an avalanche earlier this morning", said Robert Yawger, director of energy futures at Mizuho in NY.
To tackle the drop in demand, OPEC and its allies including Russian Federation, a group known as OPEC+, agreed to a record supply cut of 9.7 million bpd starting on May 1.
In Europe, some countries were reviving curfews and lockdowns to fight a surge in new coronavirus cases, with Britain imposing tougher COVID-19 restrictions in London on Friday.
"Crude prices are looking very vulnerable as the coronavirus continues to spread like wildfire across Europe and trending higher in the US", Moya added. The average LNG price for December delivery into North-East Asia was estimated at $5.80 per million British thermal units (mmBtu), up 10 cents from the previous week.
The bearish demand outlook and rising supply from Libya may mean OPEC+ could roll over the existing cuts into next year, OPEC+ sources said on Thursday.
Assuming global demand rebounds as expected, this in theory leaves room for OPEC members to increase output in 2021 by over 3.8 million bpd from September's rate without causing a glut.
Top global oil traders Vitol, Trafigura and Gunvor said they saw slow oil demand recovery because of the resurgent pandemic.
Asian spot prices for LNG rose to their highest in more than 11 months last week, underpinned by expectations that an anticipated cold winter will stoke demand for the fuel used in heating.
President Donald Trump said he is willing to raise his offer of $1.8 trillion for a COVID-19 relief deal with Democrats in the U.S. Congress, but the idea was shot down by his fellow Republican, Senate Majority Leader Mitch McConnell.