Oil Falls $2/Bbl

October 1, 2020

Signs that Iraq did not adhere to its quota better in September are weakening the oil market. Additionally, Saudi Arabia increased shipments by 500KBpd in September and Covid continues to delay a return of demand. Europe's casedemic is causing local governments to enact distancing and other mandates. These steps will not help the region increase economic activity in the near term, casting further doubt on the speed of a recovery. The biggest problem in the oil sector is a buildup of distillate inventories. Jet fuel demand continues to lag, and has sent distillate inventories in the US up +32% yoy. Optimism about a stimulus deal in the US has held up equities prices and "risk on," but the impact of stimulus on oil demand is expected to be muted. 


Oil production comments from OPEC+ for September are linked here: Libyan production is up to 270KBpd. This will force a response from the rest of OPEC. Perhaps our best guess is that the market is pressuring prices down to force that response, especially in light of Iraq not making up for less adherence on its quotas from earlier this summer.  

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