After a harsh year for oil traders, in which some blue chip equities hit twenty-year lows, the short-lived enthusiasm for a COVID vaccine has seen oil prices slump once again at the end of the week.
Speaking on Thursday, the IEA reiterated the sentiment of other sceptics, saying that, “It is far too early to know how and when vaccines will allow normal life to resume”. With this in mind, it said that the outlook remains poor for production and transportation, and in turn oil demand and prices.
Concisely summing up the prognosis for oil prices over the coming months, Reuters market analyst, John Kemp, said: “Coronavirus vaccines are expected to boost international passenger transportation and oil consumption, but the first significant impact will not be felt until well into the second half of 2021, based on futures price movements on Monday,”
Echoing the concerns of the IEA, OPEC‘s recent MOMR downwardly revised its projections for oil demand and prices. It stated that the demand would be ‘severely hampered’ by the ‘sluggishness’ of transportation and industrial fuel demand in OECD economies, until at least mid-2021.
It added that while a vaccine may offer some relief for these pressures, challenges including Brexit, geopolitical challenges, global debt levels, and social unrest due to COVID and rising inequality, all represent notable downside risks.
Speaking on the PEC MOMR, Oilprice.com Editor, Julianne Geiger, said: “OPEC forecast that oil demand will fall this year 300,000 bpd more than it thought last month. OPEC also said that this weak demand would continue into next year. Cutting next year’s demand outlook as well, OPEC now sees 2021 oil demand 300,000 bpd lower than it thought last month. This means it sees 2021 oil demand at just 6.2 million bpd over 2020 levels, and still under 2019 levels.”
On the Pfizer vaccine announcement, and the subsequent celebration by airlines, finance and oil, Brent Crude hit $43.80, its highest level since September. As markets close on Friday afternoon, it sits at $42.98, down by 1.26% from the previous day – while WTI Crude fell by 1.80%.
