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Advances in vaccine development and expectations that OPEC + will decide in less than two weeks to renew current cuts for three months instead of easing them from January 2021 give bulls hope that the oil market will regain some semblance of equilibrium this year next, pushing prices higher.
Currently, the general consensus among analysts and agencies is that oil prices will indeed see a hike in 2021 as above-average inventories drop with a global economic recovery and oil demand.
Several bullish signs in recent weeks have made oil market participants and analysts more optimistic about next year’s oil market, despite the current second wave of COVID-19 infections spreading across Europe and the largest oil consumer. of the world, the United States.
First, crude oil and oil inventories in the US are still above five-year average levels, but have fallen from their peaks earlier this year, according to estimates by John Kemp, Reuters market analyst based on EIA data.
Subsequently, the demand for oil in Asia has visibly strengthened in recent weeks, giving the oil market hope that in at least one region, demand will be strong in the fourth quarter.
Then, hopes for an effective vaccine Receiving FDA approval soon also instills hope that life will return to some form of normalcy at some point in 2021.
Related: Something extremely unusual just happened to China’s crude oil inventories All these factors led this week to the most superficial contango in the previous month and in the semester the Brent Crude futures market since July, suggesting that market participants now expect vaccines and economic recovery next year to help rebalance the market, which would push oil prices higher.
Current oil price expectations point to gains, especially in the second half of 2021.
The EIA he expects in its November Short-Term Energy Outlook (STEO) that as global oil demand increases, inventories in 2021 will cause some upward pressure on oil prices and Brent is expected to average $ 47 per barrel next year, from $ 44 a barrel on Friday.
The latest monthly Reuters survey of analysts, ahead of the vaccine progress announcements, was expected Brent prices average $ 49.76 per barrel in 2021, down from the $ 50.41 forecast in the previous survey.
However, the risks to oil prices are likely still to be on the downside, as rising COVID cases in the US and Europe are triggering new blockades, curfews, mask warrants and restrictions, which would weigh on economic activity and demand for short-term transport. Uncertainty about how bad oil demand will be affected and how quickly developed economies and demand recover from this second wave will continue to push prices lower, at least early next year. The vaccine’s impact on oil demand and spot oil prices is not expected to manifest in the first half of 2021, the International Energy Agency (IEA) She said last week.
Also, in the coming week, fuel demand in the US will not receive the usual increase in Thanksgiving travel as only 35% of Americans will travel for holidays, down from 65% in 2019, although Thanksgiving gasoline prices they will be the lowest since then. 2016, a GasBuddy survey shown.
“The survey results show continued anxiety from motorists even with the lowest Thanksgiving gas prices in recent years, highlighting the challenges we are facing in this pandemic,” said Patrick De Haan, head of oil analysis. by GasBuddy.
Related: Climate targets could cut natural gas investments by $ 1 trillion
The vacation travel on the sly will come after US gasoline stocks build up, even as gasoline production declines.
In the week until November 13, gasoline stocks increased by 2.6 million barrels, compared to a decline of 2.3 million barrels for the previous week, the EIA said in this week’s inventory report. Gasoline production averaged 9.1 million barrels per day last week, up from 9.3 million barrels per day the week before. Stocks of spirits have decreased, but are still around 11% above the five-year average for this time of year.
Another concern over US stocks and prices is that shares at Cushing, the designated delivery point for NYMEX crude oil futures contracts, have risen to 81 percent of capacity. VIA data shown that commercial crude oil inventories in Cushing rose 1.2% in the week through November 13. At 61.6 million barrels, inventories are 39.3% higher than this period last year.
The pace of recovery from the current challenges to oil and fuel demand and the rate of inventory drawdowns next year will determine how oil prices go until safe and effective vaccines are available to a critical mass of people.
“Once launched, the vaccine should ensure a recovery in oil demand towards the trend. But early inventory levels and spare capacity held by OPEC + need to be reduced and this could take us into the second half of 2021 before a significant recovery in oil prices can occur, “Ole Hansen, Head of Commodity Strategy at Saxo Bank, She said this week.
By Tsvetana Paraskova for Oil “
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