Brent crude prices plummeted in recent weeks as the oil market navigated election-related uncertainty in the U.S., soaring numbers of new C...

Oil Outlook November 2020


Brent crude
prices plummeted in recent weeks as the oil market navigated election-related uncertainty in the U.S., soaring numbers of new Covid-19 cases globally and despite a tightening supply outlook. On 6 November, oil traded at USD 39.6 per barrel, which was 7.5% lower than on the same day last month. Moreover, the benchmark price for global crude oil was 36.4% lower than on the same day last year and was down 40.3% on a year-to-date basis. Oil prices sank to a five-month low at the end of October, battered by the second wave of the Covid-19 pandemic in Europe which prompted authorities to reintroduce lockdown measures in most countries. Moreover, rising oil output and the absence of further fiscal stimulus in the U.S. further hurt crude prices. That said, oil prices staged a strong bounceback in early November amid premature signs of a Trump victory in a tight election race. Prices dipped again, however, as Joe Biden secured the victory in the elections, promising to deliver a green new deal and signaling a likely re-engagement with Iran. Meanwhile, shrinking U.S. crude oil inventories and news that Russia is planning to roll over current production cuts until the end of Q1 2021 boded well for prices. Oil prices should regain some lost ground next year, as the global economy shrugs off the effects of the pandemic and oil demand rises thanks to rebounding economic activity. However, the outlook remains fragile amid an unprecedented mix of geopolitical, economic and health-related uncertainty. A prolonged global health crisis and the potential continuation of widespread lockdown measures, hotly contested U.S. election results, tensions in the Middle East, output volatility in Libya and OPEC+ production cuts are key factors to watch ahead. FocusEconomics panelists project prices to average USD 52.1 per barrel in Q4 2021 and USD 55.7 per barrel in Q4 2022. This month, 3 panelists upgraded their projections for Q4 2021, although 6 panelists revised down their estimates. Meanwhile, 26 panelists left their projections unchanged. Highlighting the lingering uncertainty, panelists continue to have diverging views on the price outlook: For Q4 2021, the maximum price forecast is USD 65.0 per barrel, while the minimum is USD 43.9 per barrel.




West Texas Intermediate (WTI) crude prices plunged over the past month, rocked by uncertainty over elections in the U.S. and a frail global demand backdrop due to soaring Covid-19 cases. WTI crude oil prices traded at USD 37.0 per barrel on 6 November, which was 8.8% lower than on the same day last month. Moreover, the price was 34.2% lower than on the same day last year and was down 39.5% on a year-to-date basis. The second wave of the Covid-19 pandemic hit Europe and the U.S. hard in late October, prompting authorities to reintroduce lockdown measures in most countries and hammering oil prices in turn. This, coupled with bearish factors in the U.S.— rising oil output, the absence of further fiscal stimulus and election-related uncertainty—sent WTI prices diving to a five-month low on 30 October. Although prices rebounded strongly in early November, on premature signs of an election victory for President Trump, Joe Biden’s projected victory in the elections dealt another blow to prices in recent days, as markets reacted to a green new deal agenda and likely reengagement with Iran. Shrinking U.S. crude oil inventories and news that Russia is planning to roll over current production cuts until the end of Q1 2021 supported the prices, however. Oil prices are seen trending upwards next year, propelled by recovering demand as the impact from the pandemic fades. That said, the outlook remains uncertain, with a longer-thanexpected global health crisis and the subsequent continuation of lockdown measures in many countries seen as a key downside risk. Geopolitical risks due to the hotly contested U.S. election results, lingering tensions in the Middle East and output volatility in Libya and the U.S. and uncertainty over OPEC+ output discipline, are all major factors to watch going forward. FocusEconomics panelists project prices to average USD 48.5 per barrel in Q4 2021 and USD 51.3 per barrel in Q4 2022.



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