Weaker oil demand with the spike in coronavirus cases will likely prompt the OPEC+ alliance to roll over the current 7.7-million-bpd production cuts into 2021, instead of easing them by 2 million bpd from January, the president of the Petroleum Association of Japan (PAJ) said on Friday. “Given the weaker oil demand amid the resurgence of COVID-19 infections, OPEC+ is likely to keep the current curbs ... after January,” PAJ’s president Tsutomu Sugimori said at a news conference, as carried by Reuters.
The market has largely priced in an extension of the current OPEC+ cuts of three months through the end of the first quarter of 2021, and the group is reportedly also leaning toward such an extension, in view of the weak demand in many developed economies that are grappling with a second wave of COVID-19 infections.
Japan’s fuel demand is under threat as cases in the country have soared in recent days.
Gasoline demand in Japan in November could be 2 percent lower compared to the same month last year, said PAJ’s Sugimori, who chairs the country’s top refiner Eneos Holdings. However, the recent spike in COVID-19 infections could trigger a much steeper drop, of around 9 percent, in gasoline demand in December and January, Sugimori added.
Japan, which did very well compared to other major economies in the first coronavirus wave in the spring, is now seeing record daily COVID cases in the second wave. Japan hasn’t yet restricted travel or business activity, but experts are concerned about the trend ahead of the winter parties and holidays.
The spike in virus infections in Japan comes just as signs have started to emerge that crude oil demand is firming up in Asia, which remains the only bright spot on the oil market as demand remains depressed in major developed economies in Europe and in the United States.
By Michael Kern for Oilprice.com
