WASHINGTON (DTN) -- Nearby delivery oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange slipped in pre-inventory trade early Thursday, with the West Texas Intermediate and Brent contracts consolidating below two-month highs following downward revisions to the near-term demand outlook from the International Energy Agency and tapered optimism over the impact of coronavirus vaccines on global economic activity during the first half of next year.
"It is far too early to know how and when vaccines will allow normal life to resume," said Paris-based energy watchdog in its monthly Oil Market Report released this morning. "For now, our forecasts do not anticipate a significant impact in the first half of 2021."
The agency slashed 1.2 million barrels per day (bpd) from its fourth quarter demand forecast and 700,000 bpd from first quarter of next year, highlighting the deleterious impact on global oil demand from a "second wave" of COVID-19 infections in the Western Hemisphere.
For 2020, IEA estimates global oil demand to average 91.3 million bpd, down 8.8 million bpd from pre-COVID 2019 level, with demand next year projected to recover 5.8 million bpd to 97.1 million bpd, which is still 3 million bpd below 2019.
In the near term, the poor outlook for demand and rising production from Libya, Iraq and the United States suggest weak market fundaments will continue to pressure oil prices for months to come.
These concerns were echoed this week by European Central Bank Head Christine Laggard who warned that the economy could face a "bumpy" and "stop-and-start" recovery despite good news about the vaccine development.
"We are seeing a strong resurgence of the virus and this has introduced a new dynamic," said Laggard on Wednesday. "While the latest news on a vaccine looks encouraging, we could still face recurring cycles of accelerating viral spread and tightening restrictions until widespread immunity is achieved."
Under an optimistic scenario, EU Health Agency Chief Andrea Ammon this week said the first vaccinations against COVID-19 to be administered in the European Union would begin to take place in the first quarter of 2021.
Overnight data from Eurozone showed industrial production in the 19-nation bloc fell into contraction at 0.4% versus consensus for a modest growth of 0.9%. The EU economy is now likely to post negative growth in the fourth quarter under pressure from renewed lockdowns and restrictions on travel.
Traders on Thursday now await the release of inventory data from the U.S. Energy Information Administration due out 11 a.m. ET, delayed one day due to Wednesday's observance of Veterans Day. Earlier this week, American Petroleum Institute released a bullish set of inventory data for the week ended Nov. 6, sending front-month WTI futures to a two-month high settlement at $41.45 barrel (bbl) on Wednesday.
Data showed U.S. commercial crude oil supplies declined 5.147 million bbl during the week ended Nov. 6 following an 8 million bbl decrease week prior. Gasoline inventories fell three times expectations, down 3.297 million bbl, and distillate fuel stocks eroded 5.619 million bbl from the previous week.
In early trading, the December WTI futures slipped 20 cents to $41.25 bbl and the January Brent contract on ICE traded near $43.50 bbl. December ULSD futures slid 0.55 cents to near $1.24 gallon, reversing from a $1.2982 three-month high on the spot continuous chart. December RBOB futures reversed from a $1.2341 one-month spot high to trade near $1.1675 gallon.
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