Macro Oils short-term outlook: November 2020 Report

Commodity Market Report 03 November 2020

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Report summary

Brent oil prices fell below $40 per barrel in late October. Another surge of coronavirus cases in Europe and North America has triggered downward revisions to the outlook for oil demand. As the same time, Libya crude oil production is returning to the market. OPEC+ are scheduled to ease production restraint further in January 2021. However, based on our market fundamentals analysis, we are now assuming that the current OPEC+ cuts will be extended through H1 2021, to avoid a large oversupply in the market. Highlights of our Macro Oils short-term outlook include: • Oil demand downgraded as Covid-19 cases surge in Europe and North America recovery stalls • Global oil supply lowered in 2021 based on new assumption of extension of current OPEC+ cuts through the first half of the year • Hurricanes Zeta and Delta impact US Gulf of Mexico supply in October • China is one bright spot for demand • Supply and demand balance outlook through 2022 shows tightening…eventually

Global supply: extension of OPEC+ cut assumption sharply lowers output in 2021
- OPEC+ production cuts: extension of current cuts assumed beyond end-2020
- Non-OPEC: OPEC+ compliance revised and US Gulf of Mexico in the eye of multiple storms
- US Lower 48: sector consolidation risks budgets
- OPEC: Libyan production return exceeds expectations
Global demand: Pandemic revisited – Covid-19’s growing Q4 wave freezes demand growth
- Q4 2020 and Q1 2021: Another Covid-19 surge stalls the demand recovery
- 2021 and 2022: Demand’s growth path proceeds cautiously
- Regional Outlooks: Covid-19 sets the growth path for North America/Europe demand, China leads non-OECD growth
- Europe: Nationwide lockdowns negate Europe’s demand recovery
- North America: Stalls in economic reopening clip US demand, Mexico demand in Q4 to call as border stays respond to rising Covid-19 cases
- China/India: China’s economic growth feeds the demand recovery, India’s demand growth remains divergent
- Latin America: Brazil’s recovery remains pressured as Covid-19 restrictions continue
- Africa: Protests in Nigeria, not the pandemic, hit transport fuel demand
- 1 more item(s)...