Oil Price Volatility Likely to Last Throughout November
November 3, 2020
Yesterday started out early with a big sell off but prices recovered as the day went on and eventually traded positive. There were some big ranges to yesterday’s trading. RBOB and ULSD highs to lows was roughly $0.06 cents per gallon. It was an impressive day, but I think we need to take it all with a grain of salt. The fact that it was the day before the election merit a bit of caution. I am sure that there were many traders that did not want to go home short, so they covered their positions and went home square. The bulls need upside follow through to suggest yesterday’s rebound was the real deal and the start of a run higher. Despite the impressive rally WTI, RBOB, and ULSD are still in their ranges and have not staged an upside break out yet.
The market is still concerned about rising cases of coronavirus and with it less energy demand. This is a continuing headwind for higher prices. Vitol and Trafigura expect a resurgence in coronavirus cases in Europe and the United States to hurt fuel demand although their estimates vary. Vitol’s CEO, Russell Hardy, said the latest European lockdowns definitely will affect demand, but probably only by half a million barrels a day, across Northwest Europe, adding that this would be on top of what was already impacted. Trafigura’s Executive Chairman & Chief Executive Officer, Jeremy Weir, said a second virus wave would see oil demand destruction at about 1 million bpd in the United Sates and 1.5 million bpd in Europe. Vitol see winter demand at 96 million bpd, while Trafigura expects oil demand to fall to around 92 million bpd or below in the short term.
OPEC+ is giving the indication that they will hold back on the original plan to increase production in January. This is not new news but getting headlines currently to try and add some support to prices.
Goldman Sachs said virus uncertainty, lockdown headlines and the aftermath of US elections point to oil price volatility through November and near-term downside. It expects OPEC+ to likely delay its 2 million bpd production increase past January which would help secure a large deficit through the first quarter and the rest of 2021.
China reported their factory activity expanded at the fastest pace in a decade.