Macro Oils short-term outlook: July 2020 Report

Commodity Market Report 02 July 2020

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Report summary

OPEC+ is likely relieved the group decided on 6 June 2020 to extend its largest production cut of 9.7 million b/d an extra month, for July. With the world’s largest oil consumer struggling to contain the coronavirus, we had to revise the US demand forecast for H2 2020 downward this month. Other countries are also seeing a persistent first wave of Covid-19 with a potential downward risk for economic recovery and oil demand. The revisions have not changed the basic trend, however, of recovery in liquids demand from April’s low when a worldwide economic shutdown prevailed. Currently, openings in some areas are offsetting delays in others, as oil demand claws back from its April collapse. Highlights of our Macro Oils short-term outlook include: • Steep OPEC+ supply reduction as key producers show strong levels of compliance • Declining rig count continues to dampen US Lower 48 production • China demand recovery is well underway • Global floating storage is falling

Global liquids supply: non-OPEC outlook revised lower, led by US Lower 48 downgrade
- Non-OPEC supply: Q2 downgrades and slower recovery of US L48
- US Lower 48: declining rig count drives our updated view
- OPEC: strong adherence to production cuts from key producers
Global demand: Path to demand recovery at risk in H2 2020 amid regional outbreaks
- H2 2020 global liquids demand faces a slower recovery
- North America and Latin America: Continued first wave pressures recovery pace
- Europe: Demand recovery continues amid phased reopening
- Asia: China and East Asia demand rebounds while India faces rising Covid-19 cases
- Middle East: Rising Covid-19 infections threaten the pace of economic recovery
- Risks to the outlook