LONDON: Oil prices were broadly steady on Wednesday as rising global coronavirus disease (COVID-19) cases took the shine off an earlier rally spurred by a bigger-than-expected drop in US crude inventories.
Oil producers face an unprecedented challenge to balance supply and demand as factors including the pace and response to COVID-19 vaccines cloud the outlook, an official with International Energy Agency (IEA) said.
“Producers are grappling with huge uncertainty about where this goes from here,” said Tim Gould, head of energy supply outlooks and investment.
“That’s not just in terms of economic recovery but indicators we wouldn’t necessarily normally be looking at: (Such as the) levels of trust in different countries about vaccines.”
Crude stocks in the US dropped by 5.8 million barrels last week to around 484.5 million barrels, data from the American Petroleum Institute showed late on Tuesday.
That was far more than analysts’ expectations in a Reuters poll for a fall of 2.3 million barrels.
The Organization of the Petroleum Exporting Countries (OPEC) and allies such as Russia agreed this month to cut crude production through March in a bid to match abundant supply with demand which has sagged amid surging virus cases while vaccination programs get underway.
While the pandemic has prompted some energy majors and watchdogs to predict that a peak in the world’s demand for oil has been brought nearer or may have already come and gone in 2019, Gould said the IEA disagreed.
“As things stand, with the pace of change we see on the structural side is not enough in our view to deliver a peak anytime soon.”
“Growth in the economy, recovery in the economy will sooner or later bring oil demand back to 2019 levels. The 2020s in our view are the last decade in which you are likely to see increasing oil demand,” he added.