KUALA LUMPUR: Demand for crude oil is expected to pick up in the third and fourth quarters this year reaching up to 90 million barrels per day (bpd) in line with the global economic recovery, says an analyst.
Juwai IQI chief economist Shan Saeed said at present the demand is lower due to the global lockdown and softening demand in the energy market, as countries ban people from travelling to prevent Covid-19 from spreading.
Today, the benchmark Brent crude oil is trading at US$28.27 per barrel, down by 4.49%, with demand at 30 million bpd.
“The recent production cuts by the Organisation of Petroleum Exporting Countries (OPEC) and OPEC+ have heralded a new era of normalcy to the energy market.
“Oil prices have dropped 53% since Feb 24, so the recent action will likely send oil prices to move between US$30 and US$40,” he said in an interview.
Shan foresees further production cuts going forward, which could move prices up to between US$47 and US$59, premised on a weaker US dollar and geopolitical risks, among others.
“Production cuts help stabilise the oil market,” he said, and expects crude oil demand to touch 102 million bpd by the first quarter of 2021.
“The global economy is going to rebound and most of the energy demand will be coming from Asia. Asia is the future and is going to lead the global economic growth outlook,” he asserted.
Meanwhile, Bank Islam chief economist Dr Mohd Afzanizam Abdul Rashid said it remains to be seen whether the 9.7 million bpd cut by OPEC and its allies could provide a strong lift to the prevailing prices beyond US$40 on a sustained basis.
“Global oil demand is expected to fall by 90,000 bpd this year, the first decline since 2009, according to the International Energy Agency (IEA),” he said.
Mohd Afzanizam said last year, more than 80% of global oil demand growth was contributed by China.
Based on the latest International Monetary Fund forecast, China is expected to grow by a minuscule 1.2% in 2020. It’s highly uncertain whether the current oil supply cut arrangement would materially help to stabilise the oil prices, he cautioned.
Earlier today, Malaysia announced its decision to cut crude oil production by 136,000 bpd for May and June.
Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed was reported as saying in an interview that the country welcomes the supply reduction agreement between OPEC members and allies, saying it would stabilise the global oil market and ensure supply security for consumers.
OPEC and allies led by Russia agreed on Sunday to a record cut in output to prop up oil prices amid the coronavirus pandemic in an unprecedented deal with fellow oil nations, including the United States, that could curb global oil supply by up to 20%.
Although it is not an OPEC member, historically Petronas has been loyal to the organisation. Petronas reportedly produces between 650,000 to 750,000 bpd. – April 15, 2020, Bernama
