The crude games continue.
While crude oil markets continue to be sloppy, despite the possibility of a small bull run just before the weekend, the Organization of Petroleum Exporting Countries and their allies in OPEC-plus are opting to keep their cards close to their chests.
Avoiding any hint about their next steps, after their virtual meeting last Thursday, Prince Abdulaziz bin Salman, the Saudi energy minister, said: “Anyone who thinks they will get a word from me on what we will do next is absolutely living in a La La Land.”
However, he said, “I’m going to make sure whoever gambles on this market will be ouching like hell.”
Warning traders against betting heavily in the oil market, he said he will try to make the markets “jumpy.”
And Reuters reported that “in case the oil markets continue to sour on account of weak demand and rising coronavirus cases,” OPEC-plus may also hold an extraordinary meeting next month.
OPEC is obviously concerned.
The resurgence in COVID-19 cases would further dampen oil demand and interfere with a decline in oil inventories, Reuters reported, citing an internal document of the OPEC-plus technical panel.
A number of countries are showing signs of virus resurgence. In India, the number has crossed the five million mark.
So OPEC has cut its global crude consumption estimates by 400,000 barrels per day (bpd) for this year and the next. It now sees a drop in demand of 9.5 million bpd in 2020.
Last month, OPEC projected a demand drop of 9.1 million bpd in 2020. In 2021, according to OPEC then, consumption would rise by only 6.6 million bpd – still behind 2019.
The International Energy Agency also now expects 2020 oil demand to be 8.4 million bpd lower than it was a year ago. The projected drop in demand is up from 8.1 million bpd forecasted in August.
“The uncertainty created by COVID-19 shows little sign of abating,” IEA stated in its September Oil Market Report.
“As national lockdowns eased, there was an initial sharp recovery in demand led by gasoline, but the curve has flattened out and it is becoming increasingly apparent that COVID-19 will stay with us for some time,” IEA added.
Oil major BP, in its annual energy outlook released last week, strongly underlined that the world is past the era of growing crude oil demand and that it may never recover to pre-pandemic levels. The pandemic had changed society’s habits and needs, the report emphasized.
It also referred to the rise in technological advances in electric vehicles and batteries, and rising interest in hydrogen fuel. The report also predicts an increase in renewable electricity generated by more wind farms, solar panels and hydro generation. All these would impact consumption patterns, the report says.
Producers are beginning to react to changing demand dynamics. Kuwait Oil Co. (KOC) has scrapped a $400-million project awarded earlier this year, due to low oil prices, a Kuwaiti newspaper reported. The project would have involved the development of heavy crude facilities in the north, including 11 oil wells.
Statistics Canada is saying that investments in the country’s oil and gas sector fell by 54 per cent in the quarter ended June 30, as producers chopped budgets amid sliding global oil prices and plummeting demand patterns.
All this does not bode well for the oil and gas sector.
Toronto-based Rashid Husain Syed is a respected energy and political analyst. The Middle East is his area of focus. As well as writing for major local and global newspapers, Rashid is also a regular speaker at major international conferences. He has been asked to provide his perspective on global energy issues by both the Department of Energy in Washington and the International Energy Agency in Paris.