With the launch of the “good ship 2021,” there is one thing that we all know that is for certain – we are entering a year long voyage through a fog of more uncertainty.
Yes, that doesn’t instill an appreciable level of confidence at the launch of price forecasting season, which is now. Confining discussion to the liquid petroleum arc of the energy rainbow, where, how, and why prices will move over the next 12 (dare I say 24 months), will depend on which cat wins the alley fight.
There are only two cats in the alley: The virus and the vaccine.
At this point the virus is winning with a devastating effect on the oil industry.
Demand for all refined products is down; gasoline by 12% as people working from home means the car stays in the driveway and jet fuel is down by 38% as lockdowns and sheer fear have mothballed many jets in their hangars.
Despite this, OPEC, plus the rest (meaning Russia and whoever else wants to join in), have decided to cut crude oil production by 1 million bpd beginning in February.
What?!
If you have a commodity that the consumer wants and actually needs, then – I would understand why a producer would need and want a higher price and one way to do that is to stall supply – but are you reading the headlines OPEC?
This virus is out of control and now mutating to a more contagious version of itself. This means demand will gopher hole it.
For some reason, OPEC sees demand for crude increasing over the next 12 months.
What?!
This is dependent on a successful launch and enduring efficacy of as yet an unproven vaccine.
If we believe the political cliché that there is, “light at the end of the tunnel,” then my question is in two parts:
How long is the tunnel, and is the light an economic freight train about to derail in that same tunnel?
Also clouding the energy horizon, especially for the Alberta oil producers, is the U.S. presidential transition from the hard-right President Donald Trump to the very left newly elected President Joe Biden.
Will the Keystone XL pipeline end up as a pipe dream of albatross proportions for Alberta, and the… like it or not (take it or leave it) Ottawa?
I believe that Joe Biden will stand by his support of former President Barack Obama’s decision and cancel the deal.
There is just too much Green jargon in the political vocabulary of his eco activist support base to ignore.
It won’t go away.
Investors in the oil sands will.
– Roger McKnight – B.Sc., Senior Petroleum Analyst
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