0220 GMT: Crude futures were rangebound during mid-morning trade in Asia Oct. 19, as fundamentals in the oil markets were stable.
At 10.20 am Singapore time (0220 GMT), ICE Brent December crude futures were down 13 cent/b (0.3%) from the Oct. 16 settle to $42.880/b, while the NYMEX November light sweet crude contract was down 14 cents/b (0.34%) at $40.74/b. Both international crude markets had dipped 0.39% and 0.20% to settle at $42.92/b and $40.88/b, respectively, on Oct. 16, after the Energy Information Association’s Oct. 15 data showed that US crude exports had fallen to the lowest in 14 months in the week ended Oct. 9.
The coronavirus pandemic continues to threaten global economic recovery, with Italy announcing tightened restrictions to curb the spread the virus on Oct. 18, and Ireland set
to do the same later Oct. 19. Just last week, the UK, France and Germany had also adopted more restrictive measures in their battle against the pandemic.
Stephen Innes, chief market strategist at AXI, said in an Oct. 19 note: “The coronavirus pandemic will continue to dominate attention as case numbers rise in Europe and the US [and] as governments move to impose mobility restrictions. And with a trajectory for COVID-19 infections skewed firmly upwards at this juncture, it indeed raises doubts about the robustness of the anticipated economic recovery and thus the prospects for oil demand growth.”
Against this gloomy backdrop, the market continues to pin its hopes on the possibility that the OPEC+ alliance will decide against easing their production cuts by almost 2 million b/d as scheduled from 2021 onwards, even after the UAE’s energy minister Suhail al-Mazrouei said on Oct. 13 that there are no such plans to do so at the moment.
Barkindo, when presented with the possibility of extended cuts at the Energy Intelligence Forum on Oct. 15 said: “A lot of variables may be reintroduced, but we will focus on how to best assist this market to accelerate the recovery to restore the stability, and also to sustain the stability…Whatever decision that will be taken is to ensure that the recovery in 2021 will be at a favorable pace, will gather momentum in this Q4 and will accelerate.”
Market analysts believe that given the bleak demand outlook, and the return of Libyan oil to the market, it is not advisable for OPEC+ to add more oil to the market.
“The toxic combination [of the sustained spread of the coronavirus pandemic and the return of Libyan barrels] makes the scheduled tapering on Jan. 1, 2021, very unlikely. Frankly, adding oil to the market at this juncture, with demand so fragile, is a flat-out bad idea if the group’s real intentions are to stabilize and support,” AXI’s Innes said.