World news – California – Oil producers have more than one pandemic to worry about

Factors that count against a long-term, big recovery in oil is quietly building up Joe Bidna’s victory in the US presidential election is just the latest among many blows the oil bears face

It’s not just oil executives who hope 2021 will definitely be better than the low level for 2020 but even an effective COVID-19 vaccine may not provide a way out of the mess the industry finds itself in

Eight months after the entire oil sector was humiliated for the first time due to the demand-depleting pandemic, energy stocks were boosted by the first successful vaccine trial and Brent crude rose nearly 15 percent to $ 45 ($ 62) a barrel, so defeated stocks of BP and Royal jumped. Dutch Shell and ExxonMobil between 12 percent and 25 percent

Eight months after the entire oil sector was humiliated for the first time by the demand-depleting pandemic, energy stocks have been boosted by first successful vaccine trial  Bloomberg

Investors who missed the initial rally should be wary of the euphoria The sector’s downward trend may have been exaggerated, leading to a huge bounce in the first sign of good news however, the industry has many hurdles to come

Not only will vaccines take time to roll out, traders are increasingly betting that the price of oil will struggle to recover significantly even after controlling the Coronavirus

Crude oil prices were fluctuating before the vaccine news, thanks to renewed lockdowns in Europe but the industry’s biggest concern is what the futures market refers to

Oil contracts for the following years of delivery are changing in levels to make oil executives in awe of them.

Take the Brent crude contract for December 2023 today. It can be bought for only $ 48 per barrel. This means a rise of only $ 3 per barrel over the next three years from the current oil price. However, oil has been trading at $ 70 per barrel recently in January

For the year 2025, when even the most prolific trader in Ayurich hopes that the pandemic will be a distant memory, Brent contracts rise to just $ 49 a barrel and the same contracts are more than 15 percent lower than they were before the outbreak.

While the oil forward curve has an incomplete reputation for accurate forecasting of prices, it does show projections of direction of movement when crude oil prices are expected to fall roughly in 2025 as they are now, it is difficult to conclude that the epidemic is the only problem

If the oil traders are right, and crude oil remains below $ 50 a barrel for the foreseeable future, the prospects for the world’s largest oil companies begin to appear defiant

This is why stocks in both BP and ExxonMobil, which have defined markedly different futures, slumped below levels on their darkest day in April, ahead of this week’s bounce

While environmentally conscious investors may prefer BP’s strategy, which includes increasing investment in renewables, just like Exxon, which has doubled on hydrocarbons, relies on a stronger oil price over the next few years BP needs cash inflows to help Financing the Renewable Energy Resources Hub

Factors affecting the long-term big recovery are accumulating in oil quietly first, there is a lot of spare capacity

OPEC and Russia already hold close to 8 million barrels per day without an internet connection, providing a large reserve even if demand returns to pre-epidemic levels of 100 million barrels per day over the next two years from current levels of around 94 million barrels / D

Rystad Energy says it expects global demand to peak early in 2028 at only 102 million bpd Critically, government commitments to tackle climate change, including subsidies for electric cars, have been strengthened rather than derailed by The economic repercussions of the epidemic

The demand of 102 million barrels per day is not the amount the industry is struggling to provide for new discoveries in places like Guyana. The US shale sector is poised to bounce at the first hint of stronger prices, and a decade of learning to manage the deterioration of existing fields means that supply is ample. / p>

The victory of Joe Bidna in the US presidential election constitutes another blow to oil speculators. Some of his policies, such as proposals to limit new drilling in federal lands, may reduce a few percentage points of growth from US production, but he also said that he wants to reform the Iranian nuclear deal And a step that could lift the sanctions and free this country from exporting about two million barrels per day The plans of the President-elect of the United States to re-join the Paris Climate Agreement add momentum to the « green wave. » Build internationally

There are still analysts willing to argue that the investment-hungry oil industry will ultimately lead to much higher prices. They argue that the oil cycle cannot be broken. Low prices always lead to higher prices in the end

But it is clear that if there are oil traders sympathetic to the argument, they are not showing their hands.

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Oil, Futures, Commodities