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Oil demand is showing signs of recovery, with road traffic levels and air travel rising, although the second wave of infections is slowing that rate. Inventories are also levelling off from elevated levels. Although supply curbs have played their part, this support is likely to disappear as OPEC quotas are raised under the supply agreement, strategists at ANZ Bank report.

Key quotes

“Oil demand has recovered steadily since April’s low, with increasing road traffic across developed countries. Refiners’ utilisation rates have recovered in China but remain well below the average level in the US. This paints a mixed demand picture.”  

“The US oil & gas rig count has fallen to 2005 low, with production declining in tandem with reduced rig counts. Tanker data shows that OPEC supply was already rising ahead of the OPEC+ August agreement to lift in quotas.”

“Inventories have started normalising from their Q2 high. Global floating storages have been retreating as well, with major decline coming from China’s floating inventories.”

“Signs of demand recovery and tighter injections have emerged in the LNG market. However, there appears no respite in the weakness in thermal coal market. A diverging trend in China’s coal price and seaborne price could see import demand from China.”