Energy Price Recovery Tied to Pace of Economic Rebound
November 12, 2020
OPEC stated in its monthly report that global oil demand will rebound more slowly in 2021 than previously expected because of rising coronavirus cases, hampering efforts by the group and its allies to support the market. OPEC sees 2020 world oil demand falling by 9.75 million bpd, up from a previous forecast for a 9.47 million bpd decline. It said the latest coronavirus-related restrictive measures in Europe will adversely affect demand during the rest of the year. It forecast that demand will increase by 6.25 million bpd next year to 96.26 million bpd. The growth forecast is 300,000 bpd less than expected a month ago. The weakening demand recovery could support the cast for OPEC+, to delay a scheduled increase in oil output next year. OPEC cut its 2021 forecast for global demand for its crude by 600,000 bpd. It reported that its oil output in October increased by 320,000 bpd to 24.39 million bpd, driven by a recovery in Libya’s oil output.
Energy price will be impacted by the recovery of economies around the world which will drive demand. The vaccine news has fueled strong optimism over the last few days and energy prices and other markets have run higher. As is the case in markets there are many opinions and the two big schools of thought currently are the optimistic outlook and a strong recovery and the other is another wave of restriction that negatively impacts economies and demand. Here are two outlooks that express the diversity in the market; the first from Goldman Sachs: Goldman Sachs lifter it 2020 S&P 500 target to 3,700 points after a much-awaited positive vaccine announcement and Joe Biden’s US election win triggered a rally in global stock markets. It sees the S&P 500 hitting 4,300 at year-end 2021, a 21% jump from Tuesday’s closing levels. Second Story: Hedge fund manager, Bill Ackman, is warning that the coronavirus pandemic could cause a crash of the US stock market again, possible in March. The last time he made a similar bet, he won and profited $2.6 billion or a 10,000% return on his investments in less than a month.
At least 18 oil tankers are expected to load oil to export from Venezuela in the coming weeks. The countries oil exports fell to its lowest level since the 1940’s in October due to US imposed sanctions.
Initial jobless claim released this morning were 709,000 compared to an estimate of 731,000. Continuing claims came it at 6,786,000 and the estimate was 6,825,000.