Goldman Sachs Predicts Bull Market for Commodities in 2021
October 23, 2020
EIA reported on 10/21/2020 that total US gasoline product supplied (implied demand) fell last week by 287,000 bpd down to a total of 8.289 million bpd for the week ending October 16th. US gasoline implied demand is down by 8.07% over the past 4-weeks versus last year and down by 13.1% based upon a cumulative daily average versus last year.
EIA reported on 10/20/2020 that total distillate product supplied (implied demand) fell by 587,000 bpd down to a total of 3.588 million bpd for the week ending October 16th. US distillate demand is now down by 7.0% over the past 4-weeks versus last year down by 9.5% based upon a cumulative daily average versus last year. Gasoline demand has fallen back below the 10-year minimum and distillate demand has fallen well below the 5-year mean this past week.
Goldman Sachs said a weaker US dollar, rising inflation risks and demand driven by additional fiscal and monetary stimulus from major central banks will drive a bull market for commodities in 2021. Goldman Sachs said it expects average Brent prices rising from $43.90 per barrel this year to $59.40 next year, WTI from $40.10 to $55.90 per barrel.
Russia President Vladimir Putin said OPEC+ is effective even though it is a very complex tool for global market stabilization. He said OPEC+ will follow the recovery of the markets and added that Russia did not rule out keeping existing cuts on global oil output and not easing them as previously expected. Russian President said he has been in contract with “partners” from Saudi Arabia and the US.
US petroleum refiners have made progress in reducing excess stocks of middle distillates such as diesel and heating oil by restricting crude processing and focusing on producing gasoline. However, in the first half of October, the strategy has been challenged by lower domestic gasoline consumption, forcing them to make even larger cuts in crude processing in an effort to stay on track. The volume of gasoline supplied to domestic users is now 9% below the previous five-year average, from a deficit of 4% at the start of the month. In a sign of weak consumption, inventories increased by 2 million barrels last week, the largest one-week increase since the end of May, reversing the previous downward trend. The refiners’ strategy has proved broadly successful, bringing gasoline stocks down to the five-year average and gradually reducing the surplus of both crude and distillates. However, progress has been slow and total stocks outside the strategic petroleum reserve are still 113 million barrels or nearly 9% above the five-year average.
The headwinds for the energy markets continues to be rising cases of COVID-19 and with them new curfews and stay at home restrictions. The fact that no stimulus deal has been passed is also negative for energy.