NEW YORK (Reuters) – This year has been like no other for oil prices.
Although world prices end the year at about $ 51 a barrel, close to the 2015-2017 average, it masks a year of volatility. In April, U.S. crude oil plunged deep into negative territory and Brent fell below $ 20 a barrel, plagued by the COVID-19 pandemic and a price war between Saudi Arabia’s oil giants and Russia.
The rest of 2020 was spent recovering from this fall, as the pandemic destroyed worldwide fuel demand. Although the short-term decline in US oil futures below the negative, $ 40 a barrel, is unlikely to be repeated in 2021, new blockades and the gradual deployment of vaccines to treat the virus will restrict demand. next year and maybe beyond.
“We haven’t really seen anything like it, either in the financial crisis or after 9/11,” said Peter McNally, world leader in industrial, materials and energy research firm Third Bridge. “The impact on demand was noticeable and rapid.”
GRAPH: World oil consumption collapses in 2020 –
GRAPH: Global oil demand is sinking here
Demand for fossil fuels in the coming years could remain softer even after the pandemic, as countries try to limit emissions to curb climate change. Major oil companies, such as BP Plc and Total SE, released forecasts that include scenarios where global oil demand could have peaked in 2019.
World oil and liquid fuel production fell in 2020 to 94.25 million barrels per day (bpd) from 100.61 million bpd in 2019 and production is expected to recover to only 97.42 million bpd l next year, said the Energy Information Administration.
“Every cycle feels like the worst when you’re going through it, but this has been a bad thing,” said John Roby, executive director of oil producer Teal Natural Resources LLC based in Dallas, Texas.
GRAPH: World oil production falls –
SLACKENS DEMAND
As coronavirus cases spread, governments imposed blockades, keeping residents on and off the roads. Global crude oil and liquid fuel consumption fell to 92.4 million bpd for the year, a 9% drop from 2019’s 101.2 million bpd, EIA said.
The changing landscape poses a threat to refiners. Morgan Stanley has withdrawn from the market approximately 1.5 million barrels per day of processing capacity.
According to GlobalData, global crude distillation capacity is expected to continue to rise, but falling demand and weak margins for gasoline, diesel and other fuels have caused refineries in Asia and North America to close or reduce production, including several facilities along the U.S. Gulf Coast.
Stops in more developed economies “increase refineries’ exposure to the highly competitive product export market, ”BP said in its outlook, released in September. (…)
GRAPH: Gasoline margins are weak in 2020 –
GRAPH: here they mark the refining margins
VOLATILITY CLIMPS
The next few months are likely to be volatile, as investors weigh in on lukewarm demand against another potential increase in oil supplies by producers, including the Organization of the Petroleum Exporting Countries (OPEC) and its allies.
“Markets have been tumultuous and disorderly over the past twelve months with lasting implications as we begin to form new contours of normalcy toward a post-virus balance,” analysts at Mitsubishi UFJ Financial Group said.
The volatility index of the Cboe crude oil ETF rose to a record 517.19 in April. Since then, the index has dropped to about 40, but is still about 60% higher than a year ago, according to Refinitiv Eikon data.
GRAPH: Oil volatility rises –
Reports by Stephanie Kelly and Devika Krishna Kumar in New York; Edited by David Gaffen and Matthew Lewis