The most recent WTI drop of 2.9% is the largest in a month. Supply versus demand continues to be a curious topic that is the main driver of the current crude oil situation. Oversupply of crude oil in 2020 continues as just in the past few days in the North Sea there are a combined 12 cargoes that have yet to find a buyer suggesting slow demand is taking place in the region.
With the markets slowly recovering from the COVID-19 pandemic, the oil demand in Asia is starting to return to pre-pandemic levels. Saudi Aramco’s chief executive Amin Nasser said, “We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies”. This positive news echoes the statement that Nasser made at the end of June, when he stated that the worst of the demand destruction was over and there is an optimistic outlook for the second half of the year. In June, the global oil demand was about 90 million barrels per day (bpd) which was up from the 75-80 million bpd that we saw in April.
Over the past few months, there has been a lot of negativity in the global fuels market. The price war between Russia and Saudi Arabia, as well as the COVID-19 pandemic are at the top of the list when it comes to driving crude oil prices to historic lows. However, recently there has been some small and simple actions that show signs of turnaround in a positive direction in the crude market. The Texas Railroad commission, production cuts, relaxing of local travel restrictions, and construction resuming, will all have a positive influence on the oil market.