Chinese and Japanese Oil Usage Increases
November 17, 2020
The US EIA said US oil output from shale formations is expected to fall by about 139,000 bpd in December to about 7.51 million bpd, the lowest level since June. The largest decline is expected to come for the Permian basin of Texas and New Mexico, where production is expected to fall by about 37,000 bpd, the largest decline since May, to 4.3 million bpd. The second largest decline is forecast to be in the Bakken, where output is expected to fall for the third consecutive month by about 32,500 bpd to 1.13 million bpd.
The news from Moderna that their Covid-19 vaccine was 94.5% effective sent energy prices higher but could not surpass last Monday’s rally on the news Pfizer vaccine being 90% effective. Energy prices eased off the early highs as the market is stuck in its trading range. Expect more congestion and rangebound trading as the coronavirus news of the continued spread of the virus and new restrictions in several states is a head wind for higher prices. Near term the virus is a sell the market story and the longer term vaccine news is a buy the market story and these stories will battle it out over the next few months.
There was a rebound in China and Japan oil usage with Chinese refineries processing a monthly record of 14.09 million bpd in October, which is also up by 2.6% versus October 2019.
OPEC+’s joint monitoring committee meets today to gauge the market and make a recommendation on production to the group for the end of the month OPEC meeting. It seems to be a given that they will not increase production as their plan calls for in January, but will they cut production that is the big question. OPEC+ has the same dilemma to figure out just like the rest of us; What will the virus do near term to demand and how will the potential of a vaccine help demand in the long run.