Keys to oil in 2020 and forecasts for 2021

This year that is coming to an end has been turbulent for the oil sector, mainly due to the colossal and accelerated readjustment of the global dominant system. so the priority in the energy security of the western countries intensified and anxieties for control of resources became increasingly desperate.

We come from a “quiet” January, in which the rapid spread of the covid-19 was not imagined, although the shocking news at the beginning of this month was that of the assassination of the general Iranian Qasem Soleimani by the Donald Trump administration, which set off alarms in the oil market for fears of a greater risk to energy supply in the Middle East, among other implications.

As for crude oil prices, they tended to fall in the following months when the covid-19 pandemic was already present until the noisy April 20, the day when the US WTI marker fell from 18 $ / ba -38 $ / b in a matter of hours.

In this regard, the Organization of Petroleum Exporting Countries (OPEC) did the same, coordinated and unified efforts to determine what policies to adopt to safeguard stability of the market in the face of impacts on crude oil demand in this pandemic scenario.

In light of these specific facts, it is also necessary to review the investments in alternative energy, the moves of large oil corporations and some projections of renowned organizations in order to estimate possible scenarios, given that in January , after the controversial and calamitous US election, the White House will be chaired by Joe Biden.

The ups and downs of the oil market

Without pretending to cover all the interactions that affect the oil market, it would be worth commenting on some outstanding considerations this year.

Reference was already made to the April event, which for the time being was justified by mentioning the complications in crude storage; however, the next day the WTI recorded $ 11 / b, recovering little by little all this week beyond $ 16 / b, so it is not ruled out that this maneuver has been a typical speculation, typical of the financial structure.

Similarly, concerns were present months earlier when in China, since the end of January, city closures were established as part of the quarantine, Which led to a sharp drop in energy demand.

Added to this, Russia and Saudi Arabia, the largest producers of crude oil in OPEC +, decided not to bend to deeper cuts between February and March, as market share could not be risked.

The big corporate media categorized these decisions as a “price war” and, in particular, it is doubtful that this has been entirely so, because market shares are key for any actor that is within this dynamic, even all this factor is the main issue in every negotiation. Saudi Arabia and Russia simply defended their position in the market against the producers of the American shale, which did start the real price war a few years ago, betting on the fall in crude oil prices, already that abundant and cheap oil has served as a stimulant in the West.

Losing participation and making your way to another exporting country is not very attractive in economic terms. In the oil game everyone is reluctant to see their market share decline.

Then, the uncertainty of the market intensified due to the evolution of the pandemic, as it did not take away the hope of a possible vaccine and the increase in covid-19 infections worldwide, in plus the closures of airports and cities, predicted that the outlook for the coming months did not seem encouraging for the oil sector.

However, the market remained in some equilibrium amid the retreat it experienced in the face of a possible long-term crisis, so from June to October the WTI closed the band at $ 30 / b – $ 40 / b. For the last quarter of the year it was expected that at some point the price collapse would happen again, but optimism emerged about a sustained recovery in demand due to the race for manufacturing vaccines and their rapid application.

The International Energy Agency (IEA) and OPEC have reduced its crude oil demand forecast for the remainder of the year. Although the downward revision of the IEA is slightly more optimistic, the two figures are around 90 million barrels per day and would return global oil demand to 2013 levels.

In short, there is no need to marry with optimistic projections, the world economy is entering new dynamics and to experience this year in the energy field it seems that the market has been artificially supported by financial interests, as many companies are leveraged by credit banks and if there is much fear of the drop in oil these companies could not pay their debts, which could effectively generate a demand for dollar liquidity that can destabilize the financial system and panic.

Thus, the first quarter of 2021 will be defined, in part, with the next OPEC + meeting, where several countries intend to increase their production on top of it with the implications of covid-19 regrowths spanning multiple edges.

OPEC + vs NOPEC

For more than a decade, in the context of energy security and independence across the United States, some U.S. congressmen have pushed for legislation to curb the Organization of the Petroleum Exporting Countries, but the project has not been completed. shut up.

This law is called the “Oil Non-Production and Export Cartels Act” or better known as “NOPEC”, the project was designed to eliminate state immunity, allowing OPEC and its national oil companies to be sued under the antitrust law of the United States (Sherman Law), by the Department of Justice of that country, arguing that the organization affects the prices of cru. This is utterly absurd, but in these interfering maneuvers reason does not prevail.

For 2018, Donald Trump via Twitter described OPEC as a monopoly and expressed the diatribe against the organization for keeping oil prices too high and called for them to be lowered, as if OPEC could do this at the push of a button. With these signals, in Congress the faithful promoters of NOPEC pressed to take advantage of Trump’s exaltation against the organization.

But in April 2020, in the face of the collapse of demand, Trump realized that he had to join OPEC + ‘s initiative to create unified and coordinated guidelines by consensus. Here the big turnaround happened, the US president reports that he spoke with Saudi Crown Prince Mohammad bin Salman and Russian President Vladimir Putin in order to cut oil production and thus maneuver scenarios to to come.

Days later the unprecedented was consolidated, Trump announces that “the great oil agreement with OPEC + is done.” With this fact, the role of OPEC as an intergovernmental organization to engage the oil policies of member countries and this time, accompanied by the G20 countries, was strengthened. And this has been stated throughout this difficult year, as the Organization devised the means to ensure the stabilization of prices in the market in order to avoid harmful fluctuations.

NOPEC, meanwhile, was on hold.

Upcoming scenarios with Biden at the helm

To predict the global oil scenario, it is mandatory to include the United States as a major player in the energy geopolitical orbit, both for its desperate obsession with the control of foreign energy resources and for its ideology of technological dominance. It is no secret that the root or essence of the oil industry in any country as we know it today is native to the United States.

Based on the role the United States plays in this context, Joe Biden has recently released his government management companions for the coming years. characters like Kamala Harris and Anthony Blinken are some of Barack Obama’s wards who will now be at the helm of this administration. But also the focus was on who would occupy the Secretary of Energy, and a couple of days ago reported that Jennifer Granholm, former governor of Michigan and promoter of electric vehicles, will chair this space.

Barack Obama speaks with Michigan Gov. Jennifer Granholm during the University of Michigan graduation ceremony in Ann Arbor, Michigan, on May 3, 2010 (Photo: White House)
Biden also appointed Gina McCarthy, former director of the Environmental Protection Agency (EPA), to coordinate climate change issues. McCarthy currently heads the Council for the Defense of Natural Resources, which has sued the Trump administration countless times.

This is not surprising because during his campaign Biden was explicit with the policy of Green New Deal and in the international framework is a fact the reincorporation of the United States in the process of compliance with the Paris Agreements.

Now, it seems that the democratic “heroes” will save the planet, but in the real world the facts are far from this film. Recall that the shale boom began around 2008, just when Barack Obama took office for the first of his two terms as president, making the United States the largest producer of oil and gas so far this century. .

Biden will not eliminate fracking, he is not naive, as American fracking and shale are and must be assumed as American state policy. What will surely happen downstream is a resettlement of oil companies, where some will benefit more than others.

In this sense, the alert must be maintained because this group that accompanies Biden is an expert in putting together passive-aggressive plans from different international bodies to impose agendas that serve as excuses to invade or harass, even more, countries that they do not leave tutelage. The climate agenda will be one of the crucial maneuvers they could adopt against Venezuela for next year.

A few weeks from the end of this resounding year in the energy sphere, one thing we need to be sure of is that the era of global oil instability will continue.

(Taken from Mission Truth)