Oil prices remained glued firmly to the $US40 a barrel price point despite the International Energy Agency (IEA) saying that the decline in world demand outlook has narrowed from 8.1 million barrels per day (MMbpd) to 7.9MMbpd in 2020.

It noted in its Oil Market Report – July that demand had rebounded strongly in China and India in May, rising by 0.7MMbpd and 1.1MMbpd respectively.

The IEA also noted that global oil supply fell by a further 2.4MMbpd in June to a nine-year low of 86.9Mmbpd due to robust compliance with the OPEC+ production cuts and declines from other producers such as the US and Canada.

Global oil supply could fall by 7.1MMbpd in 2020 if the cuts stay in place as agreed before seeing a modest recovery of 1.7MMbpd next year.

OPEC+ had agreed to a 9.7MMbpd production cut earlier this year though compliance by member nations has differed.

The production cut is set to be reduced to 7.7MMbpd from August to December and then down to 5.8MMbpd from 2021 through to April 2022.

However, the IEA warned that recent increases in global COVID-19 cases has resulted in the re-imposition of lockdowns of lockdowns in some regions including North and Latin America.

It says that the accelerating number of COVID-19 cases is a disturbing reminder that the pandemic is not under control and placed a downside risk on its outlook.

Major companies such as Eni and BP have also reduced their long-term oil price forecasts.

Oil price impact on Australian companies

Papua New Guinea-focused Oil Search (ASX:OSH) to recognise a non-cash impairment charge of $US360m to $US400m in its 2020 interim results.

The company said the charge takes into account the potential longer-term impact of prevailing economic conditions, the outlook for oil and gas prices and the current status of other factors that could impact on value realisation.

It added that as part of a strategic review that is currently underway, a number of exploration and evaluation assets have been identified as being of reduced priority due to lower prospectivity or sub-optimal economics.

Earlier this month, Oil Search slashed its full time workforce by about 34 per cent and set up a dedicated corporate performance and continuous improvement office.

Its ongoing initiatives are expected to reduce 2020 production costs to about $US10.50 per barrel of oil equivalent, down from previous guidance of between $US11 to $US12 per barrel.

Meanwhile, Bass Oil (ASX:BAS) has noted that oil production at its Tangai-Sukananti project in Indonesia remains largely unaffected by the COVID-19 pandemic.

The project produced a total of 21,745 barrels of oil in June, or 11,960 barrels net to the company.

Monthly average oil price was $US33.11 per barrel while costs reduction measured reduced total operating costs to about $US20 per barrel.

OSH, BAS share prices