During the week from November 2 to 8, WTI and Brent crude oil prices fluctuated between us $36.81-39.15/barrel and US $38.97-41.23/barrel, respectively. On the eve of the general election in February, the US stock market has been optimistic about the high risk of the U.S. economy. From November 2 to 4, the international oil price continued to rise, with a daily increase rate of more than 2.3%. On May 6, oil prices fell due to the tight state of the US election and the record increase in the number of new cases diagnosed in Europe and the United States. On November 6, WTI and Brent prices fell by 4.25% and 3.62% respectively to US $37.14/barrel and US $39.45/barrel.
In the past week, news including the reduction of US crude oil inventories and the possibility that OPEC will extend the current production reduction scale supported the rise of international oil prices. The U.S. Energy Information Agency (EIA) reported on November 4 that inventories fell 8 million barrels to 484 million barrels in the week on October 30 from the previous week, while an increase of 1.2 million barrels is expected.
Algeria, which holds OPEC’s rotating presidency this year, said Saudi Arabia and Russia are urging other Member States to extend the current production reduction agreement until next year, rather than gradually relaxing the intensity of production reduction as previously planned. Algeria was the first country to publicly support the proposal. Tortoise analysis pointed out that if OPEC + extended the production reduction and the US crude oil inventory fell beyond expectations, oil prices would remain relatively positive. Goldman Sachs is also optimistic about OPEC +’s plans to continue to cut production, saying it will help ensure a large-scale supply shortage in 2021.
US manufacturing activity grew more than expected in October, with new orders rising to the highest level in nearly 17 years, according to data. The U.S. stock market rose on November 2, and the trend of energy stocks was consistent with the overall trend, which constituted a short-term support for oil prices.
Meanwhile, novel coronavirus pneumonia has increased in the past week, and the increase in Libya’s production has limited the room for oil price growth. The impact of the new outbreak on the demand side is not optimistic. Germany, the United Kingdom, France and other European countries have restarted the blockade, and the overall economic outlook of the euro zone is uncertain. Italy set a record number of people infected in a single day on November 5. Weak demand in Europe continued to weigh on sentiment, with average highway usage in France, Italy and Spain falling to their lowest level since the end of June, ANZ said in a report. According to Johns Hopkins University, the number of new cases in the United States reached 102800 on November 4, the first record of new infections in a single day in the United States.
Stewart Glickman, an energy Equity Analyst at CFRA research, said the world was entering another wave of containment pressure. If there is another wave that could last the whole winter, it will further hit crude oil demand. Standard Chartered Bank expects global oil demand to fall by 8.73 million B / D in the fourth quarter of this year from a year earlier, 1 million B / D more than it expected two weeks ago.
At the same time, increasing production on the supply side poses a challenge to oil prices. Mustafa sanara, chairman of Libya’s national oil company, said Libya’s crude oil production has increased to 800000 barrels a day, and the country’s goal is to reach 1.3 million barrels by the beginning of 2021. In addition, US shale oil producers are keen to increase production, with the number of oil and gas drilling platforms rising for the third consecutive month in October, according to Baker Hughes.
At present, worries about the fundamentals of oil supply and demand will play a supporting role, with the US presidential election and the reaction of risk markets to the outcome to be the main players, said Harry tchilinguirian, an analyst at BNP Paribas. According to Raiffeisen analyst David olzant, “the two factors that will help oil prices break the current range for the rest of 2020 are the unexpected good news about the US presidential election and vaccines.”