Macro Oils short-term outlook: September 2020 Report

Commodity Market Report 03 September 2020

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Report summary

Brent prices edged higher than anticipated in August, supported by a lag in reversals for US onshore shut-ins and the preliminary closure of GoM production ahead of dual hurricanes. However, the autumn is likely to see a slower pace in price recovery as risks to the economy and demand could increase. The emergence of new coronavirus outbreaks in some countries has slowed the pace of demand growth in Q3 2020. Highlights of our Macro Oils short-term outlook include: OPEC supply increases as June's deeper voluntary cuts by the key producers ended Global demand faces headwinds from mobility limitations as pandemic resurges in Europe Impeccable recovery in China demand, getting closer to 2019 levels in Q3 2020 Floating storage outside Asia slides below early-April levels as port congestion in China causes increase

Global supply: US production for 2020 significantly downgraded, elsewhere minor downgrades are the norm
- Non-OPEC supply: downward revisions in 2020 focused on the US
- US Lower 48: deeper shut-ins than expected in May but latest corporate messaging supports our outlook
- US Gulf of Mexico: storms disrupt August production
- Canada: shut-in production is returning at a faster than expected pace
- OPEC supply: outlook for Venezuela falls even further and Iraq catches up with compliance commitments
Global demand: Demand faces headwinds amid pandemic’s resurgence
- H2 2020 : Headwinds increase as outbreaks re-emerge
- 2021: Slowing growth path limits recovery potential
- Regional demand outlooks: China leads the recovery, Europe’s demand under threat
- Asia: Infrastructure investment buoys China’s transport demand, India’s demand struggles amid pandemic, monsoon season
- Europe: Rising cases of Covid-19 put the brakes on tourism recovery
- Middle East: Iraq struggles to contain rising cases of Covid-19
- North America and Latin America: Continued first wave slows, but easing of restrictions remains locale-dependent
- Russia/Other FSU: Mobility increases in Russia support demand recovery
- Risks to the outlook