Slow Airline Industry Recovery Pushes Global Oil Demand Forecast Lower

Today the International Energy Agency released its monthly oil market report and revealed it has lowered its 2020 global oil demand forecast by 140,000 barrels per day to 91.9 million barrels per day. This is 8.1 million barrels per day lower than last year, which is greater than the 7.9 million barrels per day difference it had predicted in July.

This is the first downgrade in several months and it comes due to the stalling of mobility as the number of COVID-19 cases remains high, and air traffic staying stubbornly low. 2021 global demand estimate has been revised down by 240,000 barrels per day to 97.1 million barrels per day.

"Recent mobility data suggest the recovery has plateaued in many regions, although Europe, for now, remains on an upward trend," it said in the press release, speaking of the impact on road transport fuel demand. "In April the number of aviation kilometers travelled was nearly 80% down on last year and in July the deficit was still 67%. With few signs that the picture will improve significantly soon, we have downgraded our estimate for global jet fuel and kerosene demand."

The Paris-based organization also warned that "the oil market’s rebalancing remains delicate" due to uncertainty and possibility of higher output, even though June demand exceeded supply and there is an implied stock draw for the rest of the year.

Fed Officials Say Recovery Losing Steam

In the U.S., Federal Reserve officials are talking about the continuing spread of the virus in several states prolonging the economic downturn. Their statements come against the backdrop of an impasse in Congress over the next stimulus package and testing numbers falling sharply. President Trump said a deal is "not going to happen" at a news briefing yesterday. This was hours after Republicans and Democrats spoke for the first time since talks fell apart on Friday. Both sides have accused the other of not compromising.

Boston Fed President Eric Rosengren said the economic data indicates that the recovery "may be losing steam" and the recent slowdown in economic activity is likely to continue this fall. He added that Europe's economic activity has been more "robust" since countries did not reopen until the virus had reached low levels. San Francisco Fed President Mary Daly told reporters that the halt in the $600 a week unemployment benefits may create "a little bit of a hole" in consumer spending, and she's hearing reports of foot traffic slowing as people realize the virus isn't behind us. "Businesses that had a sign that said 'We’ll be back,' those signs are gone," she said.

The American Bankruptcy Institute says 800 small businesses filed for Chapter 11 bankruptcy between mid-February to July 31. Over 80,000 U.S. businesses have closed permanently from March 1 to July 25, according to data from Yelp.