OPEC predicts a gradual recovery in global oil demand collapsing due to the coronavirus crisis, and says producers’ record cuts help stabilize the market.
In its monthly export report, the Organization for Petroleum Exporting Countries states that demand expected to decrease by 6.4 million barrels (bpd) per day in the second half of 2020, and the decrease to be less than 11.9 million bpd in the first six months of the year.
Oil prices collapsed due to travel and economic activities, which were locked up by government restrictions to prevent the spread of the virus. While some countries in Europe and Asia are easing restrictions, concerns about new virus outbreaks are putting prices under pressure.
To deal with the decline in demand, OPEC and its allies agreed on a record supply cut that began on May 1, while the US and other countries said they would produce less. At a time when the demand collapsed, no other attitude could have been considered.
The oil market has been strongly supported by reducing the global surplus of oil, thanks to a historical, voluntary, inevitable production compromise.
A technical committee and OPEC + ministerial panel of OPEC and its allies, known as OPEC +, meet on Wednesday and Thursday to review the impact of the supply cut on the market.
While Brent crude LCOc1 is traded below $ 16 that was the lowest level in 21 years reached in April, and is now trading above $ 40 a barrel.
In April, the agreed supply agreement consists that OPEC + cutting out 9.7 million bpd production output in May and June. OPEC + has been pleased with the decision and decided on 6th of June to extend the production output cuts for another month until the end of July.
OPEC announced in May that it cut supply by 6.3 million bpd to 24.2 million bpd. According to the calculations, this means a higher than some estimates and a 84% cooperation with the promises.