Oil prices drop for a second day with market oversupplied

London — Oil prices dropped for a second day on Friday, pulling further back from a one-year high after oil cartel Opec again lowered its demand forecast and the International Energy Agency (IEA) said the market remains oversupplied.

Brent crude was down 34c, or 0.6% at $60.80 a barrel by 10.5am GMT, having dropped 0.5% in the previous session. US oil was down 39c, or 0.7% at $57.85 after falling 0.8% on Thursday.

Both contracts are still on course for weekly gains, however.

Oil closed on Wednesday at its highest since January 2020 after coming close to a record-setting run of consecutive daily gains.

Prices have risen over recent weeks, partly due to oil production cuts from Opec and other producers (Opec+). This week, however, Opec said it expects global oil demand to recover more slowly than thought in 2021, trimming its forecast by 110,000 barrels per day (bpd) to 5.79-million bpd.

The IEA said that oil supply was still outstripping global demand, though Covid-19 vaccines are expected to support demand recovery.

“The report paints a more pessimistic picture than market participants have presumably been envisaging, given the current high prices,” Commerzbank said.

Demand data from the world’s biggest oil importer also paints a bleak picture.

The number of people who travelled in China ahead of Lunar New Year holidays plummeted by 70% from two years ago as coronavirus restrictions curbed the world’s largest annual domestic migration, official data showed.

ABN Amro revised its 2021 Brent oil prices forecast slightly higher to $55 a barrel but warned of demand headwinds.

“The biggest recovery in demand will have to come from the aviation sector,” the bank said. “Especially for aviation, we do not yet see a major recovery this year.”

Reuters