UAE Says Oil Prices Will Soon be Back to Normal

Marco Green
June 17, 2020

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading higher on Tuesday after shrugging off earlier weakness.

"The rise in USA crude oil inventories to a record high last week to 538.07 billion barrels - increasing 5.7 billion barrels again an expected 1.0 billion drop - underscored the task ahead for oil markets in absorbing the excess stockpile surplus".

"Concerns about the recent uptick in COVID-19 infections in the USA and a potential "second wave" are weighing on oil at the moment", said Stephen Innes, chief global market strategist at AxiCorp.

The demand forecasts for next year fall short of levels recorded in 2019 because the record rebound will only partially offset the severe oil demand collapse triggered by the coronavirus pandemic, which is expected to erase an average of 8.1m barrels of oil a day from global demand during 2020.

Oil supplies in May, the IEA said, plunged by almost 12 million bpd, with the Organization of the Petroleum Exporting Countries and its allies including Russian Federation - a grouping known as OPEC+ - reducing their output by 9.4 million bpd.

Iraq, which has had trouble keeping up with cuts it agreed on with other key crude exporters, known as OPEC+, has reportedly asked BP to reduce production at its supergiant oil deposit so as not to miss the target level again.

Prices could return to "normal" within a year or two as curbs approaching 10 million barrels a day drain excess barrels from the market, Mazrouei said during the call hosted by the Atlantic Council, a Washington-based research institute.

Both benchmarks ended down about 8% last week, their first weekly declines since April, hit by the USA coronavirus concerns: More than 25,000 new cases were reported on Saturday alone as more states, including Florida and Texas, reported record new infection highs. But some observers said they didn't expect to see any return to the stringent lockdowns seen at the start of the year.

"If the world treats a second COVID-19 wave like in the first half of the year, then we are in for a demand reduction that was not in the initial planning", Head of Oil Markets at Rystad Energy Bjornar Tonhaugen said.

Other reports by Click Lancashire

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