Bigger Than Expected Crude Inventory Draw Boosts Oil Prices

OPEC raises 2020 demand forecast over China's recovery

Front-month gas prices in Europe and Asia are now trading at their highest since December 2019 and January 2020, respectively, putting them both more than $2 per mmBtu over the US Henry Hub benchmark.

Oil prices moved lower on Thursday as investors continued to worry about demand outlook amid the pandemic. "Truly, those wishing to bring about a tighter oil market are looking at a moving target".

"We find that China's record haul of crude growth is poised to cease as independent refineries have almost fully utilized their state-issued import quotas and companies struggle with extremely high crude inventories".

But under a "delayed recovery scenario", it said the energy demand recovery is pushed back to 2025.

The International Energy Agency said on Wednesday that a second wave of coronavirus infections could complicate efforts by producers to balance the market.

The IEA said while the pandemic has set the growth of global energy demand back by two and a half years, peak crude oil demand has already been reached in advanced economies such as the United States and the European Union, while developing economies such as China and India will drive growing oil demand in the years ahead.

On Thursday, OPEC Secretary General Mohammad Barkindo told a conference that demand was recovering at a slower pace than expected.

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In Europe, some countries were reviving curfews and lockdowns to fight a surge in new coronavirus cases, with Britain imposing tougher COVID-19 restrictions in London on Friday. In its latest forecast, Opec said oil demand would average 96.84 million bpd next year, 6.5 million bpd higher than 2020's.

OPEC and producer allies such as Russian Federation, a group known as OPEC+, will stick to their plans to taper oil production cuts from January, Suhail al-Mazrouei, the energy minister of the United Arab Emirates said on Tuesday.

Brent's three-month timespread was $1.12 a barrel in contango, where prompt prices are cheaper than later-dated ones, narrowing from $1.22 a week ago.

OPEC-member Libya is exempt from any production cuts.

"For prices to rise further, we think elevated spare production capacity among OPEC+ needs to be reduced. The group can react easily to any large production disruption by using its spare production capacity to ramp up production in case prices spike", UBS analysts said in a note.

ANZ Research pointed to sharp gains in China's crude oil imports in September and buying by India's refiners ahead of two big festivals helping support the market.

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