Resurrection in COVID-19 cases reduces oil demand rebound -IEA

Oil prices rise as investors look to higher demand seen in second half

62

Oil demand recovery will take a hit from a spike in new coronavirus cases before vaccine roll-outs and stimulus measures help in the second half of the year, International Energy Agency (IEA) said on Tuesday.

“Border closures, social distancing measures and shutdowns…will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.

“This recovery mainly reflects the impact of fiscal and monetary support packages as well as the effectiveness of steps to resolve the pandemic,” the IEA said.

Oil prices climbed on Tuesday as optimism that government stimulus will eventually lift global economic growth and oil demand trumped concerns that renewed COVID-19 pandemic lockdowns globally are cooling fuel consumption.

Brent crude futures for March rose 72 cents to $55.47 a barrel by 1152 GMT after slipping 35 cents in the previous session.

“The perception that any retracement will be quick as confidence in economic and oil demand recovery is unlikely to fade away,” said PVM analysts in a note.

U.S. West Texas Intermediate crude was at $52.65 a barrel, up 29 cents. There was no settlement on Monday as U.S. markets were closed for a public holiday. Front-month February WTI futures expire on Wednesday.

Investors are upbeat about demand in China, the world’s top crude oil importer, after data released on Monday showed its refinery output rose 3% to a new record in 2020.
Investors are watching out for U.S. oil inventory data from the industry association API, due on Wednesday, the same day U.S. President-elect Biden’s inauguration speech will likely give details on the country’s $1.9 trillion aid package.

The International Energy Agency cut its outlook for oil demand in 2021, but pointed to a recovery in demand in the second half of the year to an annual average of 96.6 million barrels per day.

“Border closures, social distancing measures and shutdowns…will continue to constrain fuel demand until vaccines are more widely distributed, most likely only by the second half of the year,” it said in its monthly report.

Comments are closed.

Subscribe to Newsletter
close-link