NEW YORK, Dec 29 (Reuters) – This year was like no other for oil prices.
Even as global prices end the year at around $ 51 per barrel, close to the average for 2015-2017, it hides a year of volatility. In April, U.S. crude fell deep into negative territory and Brent fell below $ 20 a barrel, lost by the COVID-19 pandemic and a price war between Saudi Arabia and Russia’s oil giants .
The rest of 2020 was spent overcoming that decline as the pandemic destroyed global fuel demand. While the short-term decline in U.S. oil revenues will not be negative – $ 40 a barrel is likely to be repeated in 2021, new locks and a gradual rollout of vaccines to treat the virus will prevent demand next year, and possibly beyond.
“We haven’t seen anything like this – not in a financial crisis, not after 9/11,” said Peter McNally, global divisional director for business, materials and energy at research firm Third Bridge. “The impact on demand was amazing and quick. ”
(GRAPHIC: Global oil demand is declining here)
Demand for fossil fuels in the coming years could remain softer even after the pandemic as countries try to limit emissions to climate change. Major oil companies, such as BP Plc and Total SE, have released forecasts that include scenarios where global oil demand may have peaked in 2019.
World oil and smelting fuel production in 2020 fell to 94.25 million barrels per day (bpd) from 100.61 million bpd in 2019, and output is expected to return to just 97.42 million bpd next year, Administration said Power Information.
“Every circle feels like the worst as you go through it, but this one has been difficult,” said John Roby, chief executive of Dallas, a Texas-based oil producer. Teal Natural Resources LLC.
(GRAPHIC: Global oil production falls tmsnrt.rs/3nS64KI)
DEMAND SLACKENS
As coronavirus outbreaks spread, governments blocked locks, keeping residents in and out of the roads. Consumption of crude fuel and global smelting fell to 92.4 million bpd for the year, down 9% from 101.2 million bpd in 2019, the EIA said.
The changing landscape poses a threat to ornithologists. Approximately 1.5 million bpd of processing capacity has been taken off the market, Morgan Stanley said.
Worldwide raw distilling capacity is expected to continue to rise, according to GlobalData, but falling demand and weak margins for gasoline, diesel and other fuels have prompted refiners in Asia and North America to shut down or reduce production, including several facilities on the U.S. Gulf coast.
Trends in more developed economies will “increase the visibility of refiners to the highly competitive product export market,” said BP in its view, published in September.
GRAPHIC: Redecoration edges measure tmsnrt.rs/3nMNhjW on the market
CLIMBS VOLATILITY
The coming months are likely to be volatile as investors measure tight demand against another potential spike in oil supply from producers, including the Organization of Exporting Countries. Petroleum (OPEC) and friends.
“Markets have been turbulent and chaotic over the past 12 months with lasting effects, as we begin to create new regulatory shapes towards post-virus equilibrium,” said Group analysts. Mitsubishi Finance UFJ.
Cboe Oil Crude Oil Movement Index rose to 517.19 in April. The index has dropped to around 40, but that’s still about 60% higher than this time a year ago, Efinon’s Refinitiv data shows.
(GRAPHIC: Oil volatility is on the rise here)
Reporting by Stephanie Kelly and Devika Krishna Kumar in New York Edited by David Gaffen and Matthew Lewis