Crude higher in European trading amid stronger demand outlook

London — Crude oil futures contracts were trading above their levels from Thursday on Friday morning in Europe, with bulls in the market taking heart from the latest forecasting from the International Energy Agency, which essentially calls for a less severe coronavirus demand disruption.

According to its latest report issued Thursday, the IEA forecasts 2020 demand to fall 8.6 million b/d on average compared with 2019, a better scenario than an average decline of 9.3 million b/d from the agency's prediction one month earlier.

At 0851 GMT Friday, ICE July Brent crude futures was trading at $31.91/b, with NYMEX June WTI crude futures trading at $28.18/b, up 2.5% and 2.2% from the previous day's settle, respectively.

The IEA report also highlighted that the global oversupply in crude is starting to feel some pressure from production cuts, both from the OPEC+ countries and other producers. "We are seeing massive cuts in output from countries outside the OPEC+ agreement and faster than expected," said the IEA. The IEA reported that the US and Canadian oil outputs have fallen by 3 million b/d in April compared with the start of the year, and could go lower to 4 million b/d in June.

Following this report, on Friday, the CEO of Abu Dhabi National Oil Co, UAE's biggest oil producer, said he sees signs that the oil market has tightened as cuts from OPEC+ and producers outside the coalition help rebalance the market. "When it comes to oil, there are signs that the market has tightened in recent weeks," said Sultan al-Jaber on a webcast, according to an ADNOC statement on Friday. "The OPEC-plus agreement, voluntary cuts outside OPEC-plus plus, and production shut-ins are working together to start to rebalance the market," he said.

Analysts, for their part, seemed to have a more cautious attitude in terms of the supply cut's ability to rebalance the market.

"Despite recovering demand and falling supply, the market is still in surplus...we still believe that in the near-term, the upside [for crude prices] is limited given that we are still in a surplus environment and as there is plenty of inventory for the market to digest," said the authors of a note from ING Economics, published Friday.