OPEC Decides to Watch and Wait
October 20, 2020
The market was off most of the trading day yesterday as it appears the fear of more COVID cases and demand destruction put pressure on the markets. OPEC seems keenly aware of the market’s concerns as they were talking about not adding additional barrels to the market starting in January as demand has softened in recent updates.
The OPEC meeting of the monitoring committee ended with no formal recommendations. So as of now the plan to add more barrels in January is still in place. But Russia and Saudi Arabia are concerned about weak demand and say they will respond if necessary. OPEC is going to sit and watch and see how the next month and half goes and make a decision at their meeting at the end of November. Saudi Arabia’s Energy Minister tried to reassure the market when he said that OPEC has been particularly flexible during this trying year, adapting to changing circumstances when required.
Today is Nancy Pelosi’s self-imposed deadline for an agreement in principle on another round of stimulus that could be passed ahead of the election. Talks are supposedly still going on, but the market continues to worry that no deal will get done.
The market continues to waver around the news of another stimulus, rising cases of COVID-19 and demand destruction, and rising production from Libby, and jump in US crude oil rig count.
Bank of America Global Research expects gasoline demand in 2020 to fall by 3 million bpd and rebound nearly 5 million bpd in 2021. It expects global oil demand to fall by about 9.8 million bpd on the year to 90 million bpd in 2020 and increase by 8 million bpd to 98 million bpd in 2021. It forecast Brent and WTI crude oil to average $44 per barrel and $40 per barrel in 2020 and $50 per barrel and $47 per barrel in 2021, respectively.