While oil prices were heading to register another day of gains this morning, fueled by bullish news coming from the US, the optimism was kept at check as traders focused on the global picture.

Prices swung t losses on renewed concern over the global development of oil demand. News there are definitely bearish. Paris-based IEA has cut its demand forecast for the second half of the year and the main driver of the revision is the worsening outlook for Jet fuel demand, a sentiment Rystad Energy echoes.

Total liquids balances are pointing out to a “mini-glut” during 3Q20 as demand stagnates with the end of the driving season in the US, accompanied by a hike of Covid-19 cases globally. We estimate that the recovery will only begin to pick up from October.

More bearish news could be around the corner.

China, who has remained the bright spot for the oil markets through the pandemic could soon slow down its import machinery as stockpiles continue to rise to record levels. All while OPEC production is on the rise as production quotas are relaxed.

The reason Brent prices surged slightly over $45 per barrel this morning was that the market was injected with optimism from the news of US crude commercial stockpiles edging lower for a third straight week and refinery activity rising above 80% for the first time since the pandemic started.

US crude stockpiles are likely to continue declining this quarter as net imports are set to remain at multi-weeks low and refinery activity will continuing recovering, although at a more moderate pace.

According to the EIA, US crude imports are now about 2.0 million bpd below the same period last year, mainly driven by strong reductions of volumes imported from Canada and Saudi Arabia.

We forecast Saudi volumes staying at record low levels as the Kingdom decided to keep its official selling price for September unchanged from August, rendering Saudi grades uncompetitive in the US market.

Overall, it is no surprise that oil prices sometimes record swings from gains to losses. It’s a traders market and any piece of even short-term good news, such as stock draws, is a reason for a mini price fiesta.

But when the dust of positivity subsides, the market always sees what lays behind. And a grim demand recovery outlook is a clear background now on a global level.

Under the current supply-demand trends, we see prices unable to record further sustainable gains for a few months, until supply deficits return during the last quarter of the year.

But hey, it’s not a boring month! OPEC+ meetings and hints on how the alliance’s members comply with their commitments are always exciting and could bring un-priced-in surprises.