As we approach the close of 2020, it reminds us of statistical certainty when it comes to oil price predictions. If you define anything other than an interval, you will be shown that it is wrong. And even for predictors and predictors who set a range, the probability that the actual price falls within the chosen range is as safe as a selected price range by throwing a dart at a number on the wall. This has never prevented oil price forecasters from proving it.
We’ve completed some of our favorite oil price predictions this year. And while you’re thinking that this may not be a fair exercise considering the black swan event as the coronavirus pandemic, we’ll remind you that the predictions made even in the midst of the pandemic were quite suspicious.
United States Energy Information Administration (EIA) has the unfortunate position on our list to go first. His January forecast by 2020, oil prices, for both WTI and Brent, would later be high, not surprisingly given the events that were about to unfold. Although an outbreak was reported to have occurred as early as the first days of January 2020, it would not be until January 13 that the first Covid-19 case escaped from China’s borders. But when the EIA released its STEO on January 14, demand for cratered oil due to the future pandemic was not even on its radar. What was on the radar? Tensions between the United States and Iran and the corresponding fear that there will be some disruption of oil supply in the Middle East.
His forecast for the price of an average WTI barrel throughout 2020 was $ 59.50 per barrel, while his Brent forecast was $ 65 per barrel. That compares to Brent’s average price of $ 64 in 2019. But Brent fell sharply in January, and on February 4, Brent closed the day at just $ 54 as the (pre-pandemic) world feared a slowing oil demand.
Over the next few months, the EIA adjusted its price forecasts downwards, but always chasing down prices that had fallen in the previous month.
Although the EIA fired too much for no prior knowledge of Covid-19, Morgan Stanley maybe shot too low. Morgan Stanley issued a Brent forecast in May, at the height of the blockades that could best be described as safer, they are not always better. His Brent prediction, made in late May, was that Brent would trade at $ 40 a barrel for Christmas. Of course, Brent received his own vaccine when several vaccine candidates proved effective and a limited release was set a few weeks before Christmas. OPEC then discussed how production cuts should not be reduced as promised, injecting more optimism into the market. On December 3, the day OPEC + finally reached an agreement to slightly increase production in January, Brent had reached $ 48.70 per barrel, up 22% from Morgan Stanley projections.
ExxonMobil he’s not your traditional market analyst, but he certainly has more skin in the game than most analysts. In late November, which can hardly be considered a 2020 price forecast, the American supermajor lowered its oil price expectations by 2025 to between $ 50 and $ 55 a barrel. Exxon’s oil price forecasts are considered proprietary, so this rare view (courtesy of the WSJ) of what it believes will be the next five years of oil prices should not be ruled out. Exxon’s 2025 forecast for Brent was $ 62.
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Speaking of security, there is security in numbers. Just two weeks after the EIA released oil price forecasts for 2020 in January, Reuters conducted a survey of 50 economists and analysts. But the fact that there were more does not mean that they were more right. In fact, this forecast, which set Brent’s average price in 2020 at $ 63.48, serves to highlight the degree of error. everyone era. An April survey the average Reuters closing sang a very different tune, expecting Brent to reach an average of just $ 35.84 per barrel.
Goldman Sachs made a sharp drop in the price of oil Forecast Q2 almost at the end of March, in fact, it was the second downward adjustment in a few weeks, as the pandemic took its toll on the oil markets. For the second quarter, Goldman estimated that Brent would get an average of $ 20 a barrel. Although the April average ended below $ 20, Brent’s average May price was $ 30 per barrel, and by June prices had recovered to $ 40.
In June, as Brent traded near $ 40, optimism was beginning to return to the market. As a result, Bank of America (BofA) in June adjusted upwards its forecast for a barrel of Brent during 2020, to $ 43.70 (compared to its previous estimate of $ 37). While BofA ended up being closer than many (which is to be expected, almost half of the year moving into the known category), BofA will likely end up being about $ 10 too low. When he made the forecast, of course, the optimism of vaccine candidates was not yet present in the market. What BofA could not predict either was market sentimentality for this optimism and the complete and very atypical disregard of what gross inventories in the United States would be booming.
It is advancing rapidly into September, when many of the blockades around the world had subsided. Barclays Commodities Research increased its Brent forecast for 2020 (with three months for the year) $ 43 a barrel, citing a potential disadvantage limited to its demand prospects over the “continued containment of OPEC +” after the cartel shifted responsibility to members for not meeting their production quotas, and “the evolution of the role of response from governments and the general public to the threat of the virus “” Brent was trading at nearly $ 43 at the time of the projected increase.
Regardless of where the forecasts seem to land, no forecaster got it right this year, unless, of course, they made projections during the last month or so of the year. These January forecasts, even for the best of the best, demonstrate the volatility of the oil market and can serve to expand the ranges of forecasts we see being offered for 2021 and beyond.
By Julianne Geiger for Oilprice.com
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