September 2020 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil retreated by $2.70 (-6.4%), to $39.63 per barrel in September. That decrease occurred within the context of a marginally weaker U.S. dollar (broad trade-weighted index basis -- goods and services), the lagged impacts of a 888,000 barrel-per-day (BPD) rise in the amount of petroleum products demanded/supplied during July (to 18.3 million BPD, on par with volumes during/after the Great Recession), and a slight decline in accumulated oil stocks (September average: 496 million barrels) -- although still above the five-year average maximum.

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From the 5 October 2020 issue of The Energy Bulletin:

Oil fell [during the last week of September] in New York to $37.05 and Brent plummeted to $39.27, after President Trump’s positive Covid-19 diagnosis combined with labor market weakness led to heightened concerns over an economic recovery. The coronavirus is resurgent again in Europe and hasn’t been brought under control in big economies such as India, leading to forecasters scaling back their estimates for when oil demand will get back to pre-virus levels.  Concerns are increasing that global crude supplies and demand could again fall more out of balance.

“Trump and the coronavirus news, along with the setback to the talks on the U.S. stimulus package, are just triggers and a reminder that the global economy is in trouble at least for the next six months,” said the founder of Vanda Insights in Singapore. “What’s coming on top of that is the realization that there’s more supply coming into the market just as demand growth is weakening.”

U.S. crude inventories unexpectedly declined in the week ended Sept. 25th as exports surged to a 20-week high. Commercial crude inventories fell 1.98 million barrels to 492 million, narrowing the surplus above the five-year average to 12.4%, the weakest supply overhang since late May. Some of the decline is due to the series of storms that have hampered oil production in the Gulf of Mexico in recent months.

Preliminary well production data for July shows that after recovering by around 540,000 b/d in June, oil output for the lower 48 states, excluding the Gulf, posted a second monthly increase of more than 400,000 b/d in July. Rystad Energy estimates another rise of 230,000 bpd in August from the same regions, which would take the total for the month to a peak of 9.2 million BPD.

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Selected highlights from the 2 October 2020 issue of OilPrice.com’s Oil & Energy Insider include:

Demand concerns continue. U.S. gasoline demand remained flat for most of the third quarter, undercutting hopes of a rebound. “It’s hard to paint the bullish demand story for energy in the short term…I just don’t see it,” said Jennifer Rowland, senior energy analyst for Edward Jones. “Instead, I see all the warning signs.”

Oil traders doubt OPEC+ increases production. OPEC+ is scheduled to further unwind production cuts beginning in January, adding 2 million BPD back onto the market. But some traders doubt that the group will follow through due to weak demand. “I don’t think OPEC will increase production in January...If they do, the market will test them to the downside,” Pierre Andurand, founder and chief investment officer at Andurand Capital, told the FT Global Commodities Summit.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.