Oil edges higher but bleaker demand outlook weighs

The Wilmington ARCO refinery is seen before dawn on December 19, 2003 in Los Angeles, California.

David McNew | Getty Images

Oil prices edged slightly higher on Tuesday, but forecasts of a slower than expected recovery in global fuel demand due to the coronavirus pandemic weighed.

Brent crude was up 55 cents, or 1.4%, at $40.16 a barrel, while West Texas Intermediate crude futures were up 61 cents, or 1.6%, at $37.87 a barrel. Both contracts fell on Monday.

The International Energy Agency (IEA) on Tuesday trimmed its 2020 outlook by 200,000 barrels per day (bpd) to 91.7 million bpd, citing caution about the pace of economic recovery.

“We expect the recovery in oil demand to decelerate markedly in the second half of 2020, with most of the easy gains already achieved,” the IEA said in its monthly report.

Its revision chimes with forecasts from major oil industry producers and traders, with OPEC downgrading its oil demand forecast and BP saying demand might have peaked in 2019.

World oil demand will tumble by 9.46 million bpd this year, the Organization of the Petroleum Exporting Countries said in a monthly report on Monday, more than the 9.06 million bpd decline OPEC expected a month ago.

Still, a meeting of the OPEC+ joint ministerial committee on Thursday is not expected to make recommendations for deeper output cuts, but rather focus on compliance and compensation mechanisms for its current cuts, sources told Reuters.

Concerns over supply disruptions in the United States from Hurricane Sally provided some price support.

Energy companies, ports and refiners raced on Monday to shut down as Hurricane Sally grew stronger on its approach to the central U.S. Gulf Coast, the second significant hurricane to shutter oil and gas activity in the past month.

Meanwhile, China’s crude oil throughput in August rose from a year ago, reaching its second-highest level on record, as refineries worked to digest record imports earlier this year.

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