Oil could see another demand shock - analysts

CNBC reports that the next big shock to the oil industry could be yet another hit to demand, analysts said.

That would add to the destruction already seen this year as measures taken to combat the pandemic prevented people from commuting and traveling – drastically reducing oil usage.

“A lot of us, we’re talking about another demand shock. It’s like fighting the last battle,” said Ed Morse, managing director and global head of commodities research at Citi.

He warned that oil producing countries could experience a big setback.

Earlier this year, the May contract for U.S. benchmark dived deep into negative territory for the first time in its history.

“I think it is still all about the demand, the demand destruction this year has been extraordinary,” Martin Fraenkel, president of S&P Global Platts, which projected that the contraction in global oil demand will be 8 million barrels a day by the end of this year.

“By the end of 2021, oil demand will still be below where the world was in 2019,” Fraenkel added

OPEC+ has a “delicate maneuvering act” if demand does not bounce back, Fraenkel added,  referring to the Organization of the Petroleum Exporting Countries (OPEC) and its allies.

In July, OPEC+ put in place historic supply curbs of 10 million barrels a day, but agreed to ease them to 7.7 million barrels a day from August.