OPEC Deepens Forecast for Decline in Global Oil Demand

The economic hit from the coronavirus pandemic will hurt global energy demand harder and for longer than previously feared, the Organization of the Petroleum Exporting Countries said Monday.

In its monthly report, OPEC said it expects the pandemic to reduce demand by 9.5 million barrels a day, forecasting a fall in demand of 9.5% from last year.

In further signals of the gloom, the cartel softened the amount by which it expects non-OPEC oil supply to fall this year -- in part because of a recovery in U.S. output -- as well as blunting its demand recovery forecast for next year. That was accompanied by a sharper forecast hit to the global economy: OPEC now expects a 4.1% contraction in activity.

Oil prices slipped on Monday, with Brent crude oil, the global benchmark, down 0.5% at $39.62 a barrel. West Texas Intermediate futures, the U.S. benchmark, were down 0.5% at $37.14 a barrel, with investors concerned about reports that Libyan supply may soon return to the market and that Emirati compliance with production cuts has dropped, said Eugen Weinberg, head of commodities research at Commerzbank.

The price of crude has fallen by double-digit percentages in September, with weaker-than-expected demand metrics, price cuts from major producers and economic jitters combining to shock prices out of their summer torpor.

OPEC repeatedly slashed its oil demand forecast as the coronavirus hammered the global economy during the spring, before muting its most doom-laden estimates during the summer. Monday's cut marked the second straight month in which the cartel reduced its demand forecast, a signal of the growing concern about a second spike in Covid-19 cases and a stalling recovery in oil demand.

The Vienna-based organization cited slowing economic activity, slower-than-expected recovery in transportation fuel demand, and rising coronavirus cases in India, Indonesia, Thailand and the Philippines as playing a large part in its latest forecast cut.

Monday's report comes ahead of the meeting of OPEC's joint ministerial monitoring committee Thursday, at which the cartel and its allies will discuss plans to further relax production curbs in the coming months.

While there are few signs that the OPEC+ alliance plan to adjust those plans this month, "the impact of Covid-19 related developments on already fragile global economic conditions remain[s] challenging and will require coordinated global policy action from all market participants," OPEC said in its release.

Saudi, Emirati and Kuwaiti production rose as part of the OPEC+ plan to relax cuts.

Meanwhile, the recovery in global refinery margins seen in July faltered during August, with European margins hitting record-breaking lows and barely remaining positive, OPEC said.

Write to David Hodari at David.Hodari@dowjones.com


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  09-14-20 0755ET
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