(Bloomberg) — The outlook for oil “remains fragile” as the pandemic depresses demand, and OPEC’s plans to increase supply next year will leave global markets precariously balanced, the International Energy Agency said.
“There is a risk that the demand recovery is stalled by the recent increase in Covid-19 cases in many countries,” the IEA said in its monthly market report.
At the same time, markets are set to receive fresh supplies in January as OPEC and its partners relax some of the measures they’ve taken to prevent a glut. Once the taps are opened, “there is only limited headroom for the market to absorb” anything more, the Paris-based agency said.
The acceleration in virus infections is leading many in the market to question if the Organization of Petroleum Exporting Countries and its allies will increase supply from January. Producers inside the group are also having doubts, according to delegates. Still, United Arab Emirates Energy Minister Suhail Al Mazrouei said on Tuesday that, for now, OPEC+ plans to proceed with the supply boost as scheduled.
Global oil demand remains on track for an unprecedented 8% slump this year because of the economic fallout from the virus. To offset the drop, and prop up prices, the OPEC+ alliance led by Saudi Arabia and Russia has made vast reductions in output.
Also see: Saudi Prince and Putin Urge OPEC+ Compliance as Oil Prices Sag
Their measures have “shown some success,” depleting the world’s swollen inventories in the third quarter at a rate of 900,000 barrels a day, the IEA said. Crude futures are hovering just above $40 a barrel in London.
Yet the declines in inventories will slow markedly in the first half of next year, the report showed.
Having phased out some of