This week, two prominent forecasters, the International Energy Agency and the Organization of the Petroleum Exporting Countries, trimmed their 2020 oil demand forecasts. OPEC and its allies are increasing output this month.
“Pessimism about this year’s oil demand growth prospects is due to the weakening outlook in the coming months,” said Stephen Brennock of oil broker PVM.
“To make matters worse, global oil supply is on the upswing.”
Brent crude fell 19 cents, or 0.4%, to $44.77 by 11:38 a.m. EDT (1538 GMT), but still heading for a rise of 0.9% this week. U.S. West Texas Intermediate was down 19 cents, or 0.5%, at $42.05 and was on track for a 2% rise.
Prices had been bolstered this week by U.S. government data showing crude oil, gasoline and distillate inventories falling last week as refiners ramped up production and demand for oil products rose.
“If that trend continues, it’s very supportive of prices and should drive prices higher,” said Phil Flynn, senior analyst at Price Futures Group in Chicago.
“What’s holding us back on that sentiment is that the market is still afraid of what is going to happen next with the virus.”
Oil has recovered from lows touched in April, when WTI briefly turned negative. Still, a rise in the number of novel coronavirus infections has limited gains. India reported another record daily rise in cases on Thursday.
OPEC and allies including Russia, a group known as OPEC+, have cut output since May by around 10% of pre-pandemic global demand to support the market. The deal calls for an increase in output this month as demand recovers.
An OPEC+ panel meets on Wednesday to review the market.