This month's report from OPEC's secretariat in Vienna suggests that the move might have been premature. However, with new cases of COVID-19 rising at an alarming rate in countries such as the US, India and Spain, demand has taken another major blow.
As of writing, the barrel of West Texas Intermediate (WTI) was up almost 3% on the day at $39.52.
Oil prices collapsed to historic lows as the coronavirus crisis hit demand.
The oil industry keeps pumping out gloomy forecasts due to the pandemic's pummeling of the global economy.
Furthermore, Chinese purchases of crude oil for September and October had slowed sharply and "we see that trading houses are once again looking to charter ships to store oil". "One month later, the outlook appears even more fragile". And the effect of that has spilled over to economic activity and subsequently on its domestic demand for oil. While the global economy is still expected to shrink this year, the slump won't be as sharp as previously feared, according to the OECD. Also that day, energy giant BP projected that oil consumption peaked for good a year ago and sees the coronavirus slashing oil demand by about 3 million barrels per day by 2025.
On other hand, the news coming out of China-the largest importer of oil-isn't too sanguine as well. A further decline in the coming months can not be ruled out, said analysts.
OPEC and its allies in May, implemented a 9.7 million b/d production cut accord. On the other hand, trading giant Vitol Group was more upbeat, saying inventories will likely fall even further this year.
The question is how much longer can they go on reducing output at the expense of revenues?
"What we're seeing now is that there's more pessimism because we're seeing a resurgence of the virus around the world".
Oil demand is expected to decline by 9.5m bpd, resulting in overall demand of 90.2m bpd this year, according to the oil cartel.
"Crude oil output increased mainly in Saudi Arabia, UAE, Kuwait, Algeria and Angola, while production decreased primarily in Iraq", a target="_blank" href="https://www.opec.org/" OPEC /a said, in the report. "I think the biggest worry is what happens to the fragility of the oil producing countries". Prices have been faltering for some time as the pandemic recovery continues. "Alternatively, if more refineries are forced to close, due to strong competition, Asian refiners would be in a better position to capture a larger market share, which would provide room for more crude imports". "There is still a supply overhang and lower refinery rates which have impacted crude oil production in the United States apart from a pandemic effect". "We are now in the second phase of our voluntary production adjustments", Barkindo said.
In the futures market, crude oil for September delivery touched an intraday high of Rs 2,896 and an intraday low of Rs 2,845 per barrel on MCX.
By the final quarter of 2021 it sees total non-OPEC supply just 1.26 million barrels a day below the 4Q19 level (see chart below).
More than a quarter of US offshore output was shut on Tuesday due to Hurricane Sally.