Oil Price Fundamentals - Weak Demand Dims Longer-Term Prospects

Imagine what would have happened to oil prices 10 or 15 years ago had, within the span of a few months, production from oil-producing giants Iran and Venezuela fallen sharply and traffic through the Strait of Hormuz been threatened. It's a pretty safe bet they would have surged, probably by a good $20/bbl. Back then, demand was rising inexorably, while the main fear was that supply would be unable to keep up. This made the market very sensitive to supply-side factors. That world now seems a distant memory. These days, demand is the major concern. The dour outlook for oil demand is keeping a lid on oil prices and has caused the oil market to be sensitive to anything foretelling lower demand- essentially oil now seems ready to sell off at the drop of a hat (or a PMI), and shows sluggish and ephemeral reactions to supply issues. The two developments that can overturn this trend both seem unlikely to come to pass anytime soon. These would be deeper production cuts from OPEC+ and a lasting resolution to the US-China trade war. Looking longer-term, we therefore see an increasing likelihood that Brent will be capped below $60/bbl.