Wave of Optimism Buoys Markets
November 11, 2020
The market continues to trade higher riding a wave of optimism and focusing only on the positive news about the vaccine and other bullish headlines. The market is up again this morning and quickly rallying to levels that if the market can get a settlement above will push the market into a bullish uptrend. I must continue to be cautious as this is a very volatile market and we all have a long way to go to pull out of the hole that COVID has created.
Pfizer and its German partner BioTech SE released the successful data from a large-scale clinical trial of the COVID-19 vaccine. So far there are no serious safety concerns and they expect to seek US authorization this month for emergency use of the vaccine. If authorized, the number of doses will initially be limited and many question how long the vaccine will provide protection.
The markets are also supported by comments from Saudi Arabia’s oil minister, who said that OPEC+ could tweak their oil supplies if demand slumps before the vaccine is available.
Also, supportive to prices was the API report released yesterday that showed continued declines in stocks. API reported that crude oil stocks fell 5.1 million barrels and the estimate for today’s DOE report from the Reuters survey are calling for a decline of 913,000 barrels. API reported that Cushing crude stocks were also down 1.2 million barrels. Gasoline stocks were down 3.3 million barrels and the estimates for today are for stocks to be down 263,000 barrels. Distillate stocks in the API report were down 5.6 million barrels and the outlook for today is for them to be down 1.9 million barrels. The draws across the board in the API report supported buying but we will have to see how the DOE numbers come out later this morning.
From the EIA’s monthly energy report: US crude oil production is expected to fall by 860,000 bpd in 2020 to 11.39 million bpd, a larger decline than its previous forecast for a fall of 800,000 bpd. US crude output in 2021 is expected to fall by 290,000 bpd to 11.1 million bpd, compared with the EIA’s previous forecast for a decline of 360,000 bpd. US petroleum and other liquid fuel consumption is expected to fall by 2.38 million bpd to 18.16 million bpd in 2020 but increase to 1.69 million bpd to 19.85 million bpd in 2021. Gasoline demand in 2020 is expected to fall by 1.17 million bpd to 8.14 million bpd and increase by 630,000 bpd in 2021 t 8.77 million bpd. Distillate demand in 2020 is expected to fall by 340,000 bpd to 3.76 million bpd and increase by 240,000 bpd to 4 million bpd in 2021. EIA raised its oil demand growth estimate for 2020 by 10,00 bpd from a previous estimate to a fall of 8.61 million bpd to 92.91 million bpd. It cut its 2021 world oil demand growth forecast by 360,000 bpd from a previous forecast to an increase of 5.89 million bpd to 98.8 million bpd. World oil output in 2020 is expected to fall by 6.19 million bpd to 94.42 million bpd and out in 2021 is forecast to increase by 3.97 million bpd to 98.39 million bpd.
The energy markets still have some concerns going forward; the increasing COVID cases in the US, no stimulus package, and a weak near term demand outlook. But all optimism is on the vaccine and that is driving the near term price action and is being labeled, the “vaccine trade.”