Macro Oils short-term outlook: August 2020 Report

Commodity Market Report 31 July 2020

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Report summary

The OPEC+ production cuts are working to restore balance in the market as demand climbs off the lows of April. However, as August starts, we see a pause in the recovery as signs of oversupply return. While demand is slowly recovering, the deteriorating global economy and coronavirus situation have caused a downward adjustment to our 2020 GDP forecast. In this outlook, we address the following themes: • Have production declines hit a low point in 2020? • How will the ease in OPEC+ cuts affect the supply situation in the face of the demand recovery? • Is non-OPEC production recovering as prices rise from the April collapse? • How has the pandemic’s ongoing “first wave” affected our demand outlook? • When will global liquids demand return to pre-crisis levels?

Global supply: production plummets through June, but volumes set to ease back into the market
- OPEC: compliance steps up in June; cuts due to ease from August
- Non-OPEC: cuts, compliance and curtailments
- Key revisions this month include:
- US Lower 48: shut-in volumes ease back by the summer
Global demand: Pandemic conditions and response set the pace of recovery
- H2 2020: Demand faces obstacles on the road to recovery
- For 2021, total liquids demand expected to return to 2019 levels in Q4
- Regional demand outlooks: Pandemic conditions and response set the pace of recovery
- North America and Latin America: Continued first wave pressures recovery pace
- Asia: China, India’s demand recovery path diverges
- Europe: Demand recovery fraught with prospect of increasing localised lockdowns
- Middle East: Rising oil use in power supports oil demand during the summer months
- Risks to the demand forecast