“The main concern is that oil demand will peak in the next few years due to rapid technological advances, especially in car batteries.”
Yesterday, the oil markets dropped on fears for a fall in demand and even after the publication of the United States supply data.
The American Petroleum Institute reported late on Tuesday that crude oil inventories decreased by 6.829 million barrels in the week ending July 24, against the analysts' expectations who foresaw an increase of 357,000 barrels. Nevertheless, the fear of a fall in demand ended up dominating the markets, as the coronavirus pandemic continues spreading around the world.
Sources told Reuters that the OPEC is considering the possibility that the oil demand may never recover and may peak in the next years, mainly due to technological change.
“The demand does not return to pre-crisis levels or it takes time for this to happen,” commented a source close to the OPEC to Reuters, “The main concern is that oil demand will peak in the next few years due to rapid technological advances, especially in car batteries,” it added.
The West Texas Intermediate crude oil futures went down by 1.35 percent, closing the session at the 41.04 level. Conversely, the Brent oil futures dropped 0.44 percent during the session, closing at the 43.22 level.
At the moment, there are 16,899,588 confirmed coronavirus infections in the world, as well as a death toll of 663,540. The United States leads in the number of infections, with 4,498,343 infected individuals and 152,320 confirmed deaths, followed by Brazil, India, and Russia.
The US stock markets also closed the session in the negative territory. The Dow Jones Industrial Average dropped 0.77 percent, closing the session at the 26,379.28 level, while the S&P 500 dropped by 0.65 percent during the session, closing at the 3,218.44 level. In the same manner, the Nasdaq 100 went down by 1.33 percent, closing the session at the 10,532.50 level.
The European stock markets were mixed during the session. The DAX remained almost steady, dropping 0.03 percent during the session and closing at the 12,835.28 level, while the FTSE 100 managed to advance during the session, adding 0.40 percent and closing the session at the 6,129.26 level. The CAC 40 went down by 0.22 percent, closing the session at the 4,928.94 level, while the Euro Stoxx 50 remained almost steady during the session, adding 0.02 percent and closing at the 3,303.56 level.
Meanwhile, Bank of Japan Deputy Governor Masayoshi Amamiya commented on Wednesday that the Japanese economy was shifting towards recovery, attributing this to the massive fiscal stimulus plan that the government implemented recently as well as the expansionary monetary policy stance that the Bank of Japan currently holds.
“We need to be mindful of the chance that corporate spending plans may be slashed if uncertainty over the pandemic continues. But for now, companies’ spending plans remain firm when compared with sharp falls in their profits,” he said during a speech.
In its last meeting, the Bank of Japan decided to leave the cash rates unchanged, while deciding to continue with its bond purchasing program. The bank's Governor, Haruhiko Kuroda commented that he thinks that the drop in private consumption and corporate production bottomed out.