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Global demand currently is not supportive for OPEC+ easing the oil production cuts on January 2021, Ibrahim Al-Buainain, president and chief executive of Aramco Trading, told Gulf Intelligence on Wednesday.
OPEC and its Russia-led partners will likely consider “a lot of demand issues” before tapering their cuts, he said in an interview with Gulf Intelligence. OPEC+’s decision will depend on how economies recover, including the U.S. economy from a potential stimulus, Al-Buainain added.
The OPEC+ group is set to relax the current collective cut of 7.7 million barrels per day (bpd) to 5.8 million bpd beginning in January next year. However, the second COVID-19 wave in Europe and the United States is threatening economic and demand recovery and has increased market talk and speculation that OPEC+ may not and/or should not increase oil supply at the start of next year.
Currently, the only bright spot in demand is China, which is expected to sustain solid demand in the fourth quarter and into the start of 2021, Aramco Trading’s Al-Buainain told Gulf Intelligence.
While demand in China is holding up and is back to nearly normal levels, demand in the developed economies in Europe and in the United States doesn’t look so bright at all, due to the spike in new coronavirus cases. The second wave is a threat to demand and is delaying the recovery from the slump in the second quarter, oil industry executives and OPEC itself have warned recently.
The second wave of coronavirus cases in the world is impacting global oil demand “maybe a little bit more than we thought” in the second half of this year, BP’s chief executive Bernard Looney said earlier this week.
Oil prices plunged by 4 percent at 8 a.m. EDT on Wednesday after the American Petroleum Institute (API) reported on Tuesday a bigger build than expected in crude oil inventories, adding to concerns that demand is weakening at a time when more supply from Libya is coming to the market.