Brent Crude Oil Reverses Losses on Increase in Demand Forecast
Global crude oil prices rose on Friday as the International Energy Agency (IEA) raised its 2020 oil demand forecast, and amid news that an antiviral drug for the treatment of Covid-19 may reduce mortality. Earlier in the week, prices had dropped on concerns that a surge in new coronavirus cases may lead to renewed government-imposed lockdowns and suppress international fuel demand.
Global Covid-19 infections surpassed the 12-million mark on July 10th. The U.S. had reported approximately 60,000 cases on Wednesday this week, the biggest single-day increase in any country since the outbreak started. Reported cases also rose sharply in other major countries, including Brazil and India.
The Brent crude contract for September delivery on Friday closed at US$43.24 per barrel (/bbl), up 2.1% from the previous day, after falling more than 2% on Thursday. The near-month contract for U.S. WTI crude rose 2.35% to US$40.55/bbl on Friday, also recovering from a 3% decline on Thursday.
Paris-based IEA announced on Friday that it expects global oil demand to average 92.1 million barrels per day (bbls/d), up 400,000 bbls/d from its June forecast, citing that the actual decline in demand for the second quarter of 2020 was less severe than previously expected. However, the agency warned that while the easing of lockdown measures in many countries has helped the recovery, renewed lockdowns may adversely impact this outlook.
Oil prices may also have been buoyed by American biopharmaceutical company Gilead Sciences Inc. releasing a statement on Friday saying that its antiviral remdesivir reduced Covid-19 mortality risk by 62%. Further clinical trials to confirm this are still pending, Gilead said.
In its Short Term Energy Outlook report for July released mid-week, the U.S. Energy Information Administration (EIA) said that it expects global oil inventories to decline in the second half of the year as demand recovers. The EIA also raised its price forecasts, stating that it expects Brent to average US$40.50/bbl in 2020, up from last month’s forecast of US$38.0/bbl, while WTI will average US$37.55/bbl compared with its June forecast of US$35.14/bbl.