WASHINGTON (DTN) -- Heading into midmorning trade Thursday, nearby delivery month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange edged lower after the International Energy Agency (IEA) downgraded its 2020 global oil demand forecast, citing weakness in aviation and stalled mobility in several major economies under pressure from rising coronavirus case numbers.
In its latest Monthly Oil Market Report released Thursday morning, the IEA cut its demand outlook for 2020 by 140,000 barrels per day (bpd) from the previous forecast to 91.9 million bpd, down 8.1 million bpd year-on-year. The downgrade was the first in several months and reflects the stalling mobility trend across several regions as the number of COVID-19 cases remains high.
In the United States, traffic activity remained virtually unchanged in the last four to six weeks after posting steady gains since mid-April.
Jet fuel remains the other major source of weakness. IEA's data shows the number of aviation miles traveled last month down 67% from last year, although an improvement from an 80% drop back in April. Jet fuel demand has been hammered by the coronavirus pandemic and so far has been slow to recover compared to gasoline.
"With few signs that the picture will improve significantly soon, we have downgraded our estimate for global jet fuel and kerosene demand. In 2020, demand will be 4.8 million bpd or 39% below the 2019 level, and in 2021 the year-on-year recovery will be just below 1 million bpd," said IEA.
Due to these factors, IEA revised lower its 2021 demand forecast by 240,000 bpd to 97.1 million bpd, pointing to further downgrades if the second wave of COVID-19 infections is indeed realized in the fall months.
On the supply side, IEA estimates global production rose by 2.5 million bpd last month after Saudi Arabia ended its voluntary 1 million bpd cut, the United Arab Emirates exceeded its OPEC+ target and while U.S. production started to recover.
"While OPEC+ cuts ease by nearly 2 mb/d this month and other producers restore shut-in volume, compensation for earlier OPEC+ over-production could keep world supply steady in August," said IEA.
Russian Energy Minister Alexander Novak said Thursday he doesn't expect any changes to terms of OPEC+ deal when producers meet next week. "I think no one is putting forward any hasty moves, additional proposals. The market is more or less stable and we are seeing gradual balancing of the market," Novak added.
Last month, OPEC+, decided to ease production cuts to 7.7 million bpd until December from a previous reduction of 9.7 million bpd.
Near 10:30 a.m. EDT, West Texas Intermediate crude oil for September delivery traded near $42.62 barrel (bbl) and the spot month international Brent crude contract slipped 14 cents to $45.27 bbl. NYMEX ULSD September futures declined 1.21 cents to $1.2454 gallon and front-month RBOB futures traded little changed at $1.2430 gallon.
Liubov Georges can be reached at liubov.georges@dt
© (c) Copyright 2020 DTN, LLC. All rights reserved.