Crude oil turns lower as overhang of supply weighs

Monthly oil market reports from the US Energy Information Administration, OPEC and the International Energy Agency, released last week, all tried to gauge to impact on demand from the current virus disruption. While OPEC lowered its 2020 world oil demand forecast to 1 million barrels/day in 2020, the IEA went a few steps further and cut demand to 0.83 million barrels/day, the lowest since 2011. 

The chart below shows why global oil prices are under pressure as the gab between non-OPEC production and world demand continues to widen. The IEA in their Oil Market Report wrote

"The call on OPEC crude plunges to 27.2 mb/d in 1Q20, which is 1.7 mb/d below the group’s January production of 28.86 mb/d." It continued "From the point of view of the producers, before the Covid-19 crisis the market was expected to move towards balance in the second half of 2020 due to a combination of the production cuts implemented at the start of the year, stronger demand and a tailing off of non-OPEC supply growth. Now, the risk posed by the Covid-19 crisis has prompted the OPEC+ countries to consider an additional cut to oil production of 0.6 mb/d as an emergency measure on top of the 1.7 mb/d already pledged"

The current price weakness has occurred despite a dramatic and involuntary loss of production in Libya. Since January 18 its output has slumped by close to a million barrels/day because of a blockade of ports and oilfields.