Weekly Recap: Oil Price Gains on Falling Inventories, Aramco Demand Outlook
Crude oil prices rose this week to a new five-month high as the market reacted to comments made by Saudi Aramco CEO, Amin Nasser, indicating that global demand is recovering steadily. Prices were further supported by data from both the API and EIA that showed a decline in U.S. crude inventories last week, signalling a growth in demand.
The U.S. benchmark WTI crude contract for September delivery rose 1.92% this week to close at US$42.01 per barrel (/bbl) on Friday, while the near-month contract for Brent crude rose 0.9% to US$44.80/bbl. Both benchmarks ended the week at their highest levels since the beginning of March, when oil prices had begun their steep collapse after Covid-19 was first declared a global pandemic by the World Health Organization.
In a call with journalists to discuss Aramco’s Q2 financial results on August 9th, Amin Nasser stated that he was very positive about a recovery in global oil demand in the second half of the year, as countries further ease Covid-related restrictions. Mr. Nasser said that he expects global crude oil demand to rise to as much 96 million barrels per day (MMbbls/d) by the end of the year, from current levels of around 90 MMbbls/d. He added that gasoline and diesel demand in China, the world’s largest energy consumer, is already nearly back at pre-Covid levels.
Contradictory to this, OPEC’s Monthly Oil Market Report released on Wednesday stated that the organization expects global oil demand to decline by 9.06 million bbls/d this year to approximately 90.63 MMbbls/d, compared with a previous estimate of an 8.95 MMbbls/d decline published last month. The U.S. government’s inability to come to a consensus about a second economic stimulus to help boost demand may also put downward pressure on oil prices, analysts expect.
Prices gained on Wednesday as the EIA reported that U.S. inventories declined by 4.5 MMbbls in the week ended August 7th, exceeding analysts’ expectations of a decline of 3.2 MMbbls. This followed the API’s report of a crude oil inventory drop of 4.4. MMbbls in the same week.
Prices also continue to be supported by ongoing efforts around the world to develop an effective vaccine against Covid-19. Russia’s president Vladimir Putin on Tuesday announced that the country has approved a vaccine proved to be effective against the virus, although scientists around the world expressed doubt and concern over the safety and efficacy of a Russian vaccine.