The latest OPEC market report indicates that the OPEC Reference Basket (ORB) rose by $2.53, or 6.3percent, month-on-month (mom), to stand at $42.61 per barrel in November. Year-to-date (y-t-d), the ORB has averaged $40.75/b, down by $23.07 compared to the same period last year. Spot crude prices bounced back in November, following a rally in crude futures contracts after positive news on COVID-19 vaccines raised optimism about a recovery in oil demand.
Crude oil futures prices on both sides of the Atlantic settled higher in November, with front-month ICE Brent increasing $2.46, m-o-m, to average $43.98/b, and NYMEX WTI $1.79 higher to settle at $41.35 per barrel, m-o-m. Consequently, the Brent-wti spread widened slightly by 66¢, m-o-m, to average $2.63per barrel.
However, the contango structure of crude oil futures prices flattened considerably in November, and prompt time-spreads of DME Oman flipped into backwardation in the second half of the month. In November, hedge funds and other money managers turned more positive on the outlook for oil prices, amid prospects for improving global oil demand fundamentals in the coming months.
Global economic growth is revised up slightly for 2020, after a better-than expected performance in 3Q20, now showing a contraction of 4.2 percent y-o-y, compared to the previous month’s forecast of -4.3 percent.
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While the 2021 forecast remains at 4.4percent, recent positive news about faster-than anticipated vaccination programmes in major economies provides potential upside for next year’s growth forecast. US economic growth remains unchanged at -3.6percent for 2020 and at 3.4 percent for 2021. The Euro-zone forecast is revised down to -7.3percent, while the 2021 growth forecast remains at 3.7percent. Japan’s economic forecast is revised up to -5.2 percent for 2020 but remains at growth of 2.8percent for 2021.
China’s economic growth remains at 2.0percent for 2020 and at 6.9percent in 2021. The forecast for India remains at -9.2percent for 2020 and 6.8percentfor 2021. Brazil’s 2020 forecast is revised up to -5.8percent, but remains at 2.4percent for 2021. Russia’s economic growth forecast in 2020 is revised up to -4.5percent, while the growth forecast for 2021 remains unchanged at 2.9percent.
World oil demand for 2020 is expected to decline by 9.77 million barrels per day (mb/d), marginally lower than in last month’s assessment. Weaker-than-expected data in the OECD in 3Q20, mainly due to lower transportation fuel demand in the US and OECD Europe, led to a downward revision of around 0.18 mb/d for the OECD group.
However, this is mostly offset by an upward revision to the nonOECD, by 0.16 mb/d. Better-thanexpected oil demand in China, amid a steady recovery across various economic sectors, and improving oil demand from India support this upward revision. Total oil demand is estimated to reach 89.99 mb/d in 2020.
For 2021, world oil demand growth is revised lower by 0.35 mb/d, to growth of 5.90 mb/d. This is due to the uncertainty surrounding the impact of COVID-19 and the labour market on the OECD transportation fuel outlook for 1H21.
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