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Oil’s new normal in the mid to low $40s has taken many by surprise. What was being termed as a market far away from being balanced, is now being murmured as being supplied just fine. And not just anybody, but the movers and shakers of the oil prediction business seem to have resigned to any idea of a major rally, to push oil to even in the $50s.

China’s massive demand recovery has been met by slower than expected recovery from India, South America and even Europe. Every little supply side shock has been met or even exceeded by a smaller yet key part of the Opec plus alliance getting out of line and defaulting on supply cut quotas. Recall that the US Energy Information Administration (EIA) had surprised the market earlier by revising the short-term price outlook by 10 percent – which was the sharpest such revision in recent memory.

And sure enough, the market did respond initially but failed to take off. Rumors about Opec failing to keep the smaller members united grew. Although, the compliance record for well over a year has been nothing short of stellar by the likes of Saudi Arabia and Russia – there have been instances of more vulnerable players missing the target, every now and then.

While that may not be enough to create a bigger imbalance than there already is, every Opec news has its nuisance value, and that has kept the prices from gaining any momentum. And if the uncertainty around the demand was not enough anecdotally, it got more credence from none other than Opec itself.

“Crude and product price developments in the second half of 2020 will continue to be impacted by concerns over a second wave of infections and higher global stocks,” read the Opec report on oil price outlook. The cartel expects the global demand to fall by 9.06 million bpd, 3 percent higher than its projections a month ago. The longer the pandemic stays around, the higher will the demand cut projections be.

And if demand side pressure was not enough, Opec members are all set to further increase the output, after having pumped 1 million bpd more oil in July over June. The compliance levels dropped to 97 percent, from over 100 percent a month ago. The Saudis still need oil above $80/bbl to balance the budget, but they do not seem too chuffed about continuing to lose share to everybody else. The price war might just have taken a break, it has not ended by any means.