As predicted, a second wave of COVID-19 is wreaking havoc on the world economy with many European nations contemplating new shutdowns. It looks like it will be a tough winter for the oil prices and markets.
In a recent article carried in Reuters, two energy trading firms, Vitol, and Trafigura offered dour forecasts for the next few months. Trafigura’s Executive Chairman, Jeremy Weir offered a demand forecast of a decline of a million BOPD in the U.S. and up to 1.5 mm in Europe as a result, with global demand through the winter at 92 mm BOPD. He made an additional general comment in assessing the bleak near-term outlook.
“As we move now into what we consider the second wave, our anticipation is to see for further demand destruction… So it’s really not looking good for the foreseeable future.”
Demand at 96 mm BOPD for the Winter months affecting Oil Prices
Another energy trader, Vitol was a little less pessimistic, pegging demand at 96 mm BOPD for the winter months.
In this article we will summarize what we see as the key drivers outside the impact of the virus for oil in the next six to nine months, and how we are playing market opportunities to capitalize on this current weakness.
Expectations are for another major draw when they report this week, driving the inventory overhang down toward ~470 mm as of the last week of October, 2020. That’s a decline rate over the year of roughly 7-mm bbls per month.
Keeping that constant (we think the decline will begin to accelerate a bit actually), we should exit 2020 with ~450 mm bbls in storage, and bring the tally comfortably back into the 5-year average for this time of year. 450 mm bbl may sound like a lot, but it’s less than a 1-month supply, to put it in perspective for you.
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Source; Oil Price
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