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Oil Market Snapshot – June 2020 Brent Rises to c. $41/bbl After Cuts Extensions and Firm Compliance

  • Brent rose to c. $41/bbl in June as OPEC+ extended the higher cut level of 9.7 million b/d for another month to July and posted firm compliance data
  • Saudi Arabia continues to take a hard line against supposed "cheaters", though Russia gets a free pass despite missing its target by the same volume as less powerful producers, risking group cohesion
  • We see Brent averaging $35.36/bbl in 2020 and $51.34/bbl in 2021 (+$0.87/bbl and unchanged on previous, respectively), though our 2021 forecast faces downside risks from a resurgence of COVID-19
  • Our global demand growth forecast for 2020 is cut as the OECD downgrades its outlook and the threat of a second wave of infections increases
  • US crude inventory draws have stalled in recent weeks, suggestive of a relatively weak recovery so far, but the rate of inventory build has also slowed substantially
  • Concerns over the potential for further outbreaks in China centred around Beijing see us lower forecasted demand growth there
  • Our global supply growth forecast for 2020 is raised marginally as LTO data suggests a slightly less deep nadir in production
  • We see US LTO shut-in production starting to return over the summer
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