WTI Dips on IEA Demand Downgrade, Non-OPEC Supply Growth

Liubov Georges
By  Liubov Georges , DTN Energy Reporter

WASHINGTON (DTN) -- Nearby-delivery-month oil futures on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange held lower in afternoon trade Thursday. This followed the overnight release of monthly oil market reports from the International Energy Agency and Organization of the Petroleum Exporting Countries forecasting rapidly growing oil production outside the 13-member cartel and stalling recovery in global oil demand as the COVID-19 impact drags on well into the second half of 2021.

The IEA said Thursday morning that global oil demand recovery had gone into reverse midsummer with an estimated monthly fall of 120,000 barrels per day (bpd) on the back of a resurgent pandemic in China, Indonesia, Vietnam and elsewhere in Asia. The agency downgraded its estimate of 2021 demand growth by 100,000 bpd to 5.3 million bpd, while forecasting oil consumption next year would average 99.4 million bpd -- still 1.5 million bpd below the fourth quarter 2019.

"Growth for the second half of 2021 has been downgraded more sharply, as new COVID-19 restrictions imposed in several major oil consuming countries, particularly in Asia, look set to reduce mobility and oil use," said IEA.

While OPEC didn't make any revisions to its demand forecasts and actually raised its global growth estimates to 5.6% this year and 4.2% in 2022, it significantly upgraded its non-OPEC supply estimates. Non-OPEC oil production is now expected to expand by 1.1 million bpd in 2021 to average 64 million bpd, with the United States, Russia, Canada and Norway seen as main drivers of that growth.

Put together with the IEA's demand forecast downgrades, Thursday's two reports paint a picture of an oil market that isn't as tight as forecast a few weeks ago. While the market will remain slightly undersupplied this year, rising supply in 2022 could once again leave the market in surplus.

In currency markets, U.S. dollar index pushed higher against a basket of foreign currencies to settle above 93-level after weekly unemployment claims fell for the third straight week through Aug. 7 to the lowest since March 2020 at 375,000. The continued unemployment claims, meaning the number of Americans receiving benefits for consecutive weeks, fell by a larger-than-expected 114,000 to 2.866 million applications. This marked the lowest reading for insured unemployment claims since March 14, 2020, when it was 1.770 million.

Despite tepid improvement in unemployment claims, small-business owners continue to report a record-high number of unfilled job openings, according to NFIB's monthly jobs report. Unfilled job openings last month remained far above the 48-year historical average of 22%.

"Small-business owners struggled to find qualified workers for their open positions, which has impaired business activity in the busy summer months," said NFIB Chief Economist Bill Dunkelberg. "Owners are raising compensation to the highest levels in 48 years to attract needed employees."

Elsewhere, the Producer Price Index, which measures inflation on a wholesale level, increased more than expected last month, up 1% to 7.8% year-on-year growth.

"Nearly three-fourths of the July increase in the final demand index can be traced to a 1.1% advance in prices for final demand services," said BLS, with the index for final demand goods up 0.6%. The jump in PPI index contrasted with Wednesday's release of inflation data at the consumer level, which showed a slight moderation last month.

On the session, NYMEX September West Texas Intermediate futures slipped $0.16 to settle a tad above $69 per barrel, and international crude benchmark Brent contract for October delivery softened to $71.31 per barrel. NYMEX September RBOB contract dropped 2.68 cents to $2.2754 per gallon, and NYMEX September ULSD futures settled the session little changed at $2.1039 per gallon.

Liubov Georges can be reached at liubov.georges@dtn.com

Liubov Georges