Oil futures headed higher Tuesday as a monthly report from the International Energy Agency forecast record demand for crude and its byproducts next year, but only after first dropping significantly in the current year.
The International Energy Agency said that while the world’s demand for crude will drop by 8.1 million barrels a day in 2020, demand in 2021 will bounce back by a record 5.7 million barrels a day.
However the Paris-based agency warned that the impact of the COVID-19 pandemic on global economies should not be underestimated.
A monthly report from the Organization of the Petroleum Exporting Countries is due later this week and would come after the cartel and its allies, in a group known as OPEC+, agreed earlier this month to extend production cuts of nearly 10 million barrels per day through July and to review the status of adherence to those reductions monthly.
However, output in the U.S., which is not a signatory to the OPEC+ agreement, has shown signs of further declines, with the Energy Information Administration on Monday forecasting a July decline of 93,000 barrels per day in oil production from seven major U.S. shale plays.
Meanwhile, an OPEC-led, two-day meeting of the Joint Ministerial Monitoring Committee, or JMMC, to review compliance with the recent global production cuts will kick off on Wednesday.
“Eyes are on another coming meeting as well,” wrote Bjornar Tonhaugen, head of oil markets at Rystad Energy, in a daily research note. “Thursday’ production cut compliance committee meeting is not one to miss. It may not be taking any decision on production cuts, but it will be very indicative of the mood within OPEC+,” he wrote.
Against the backdrop, West Texas Intermediate crude for July delivery, the U.S. benchmark, rose 72 cents, or 1.9%, at $37.82 a barrel, after rising 2.4% on Monday.
Global benchmark Brent oil for August delivery picked up 80 cents, or 2%, at $40.51 a barrel on ICE Futures Europe after gaining 2.6% in the previous session.