October 2020 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil edged down by $0.23 (-0.6%), to $39.40 per barrel in October. 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 116,000 barrel-per-day (BPD) increase in the amount of petroleum products demanded/supplied during August (to 18.4 million BPD, on par with volumes during/after the Great Recession), and a further decline in accumulated oil stocks (October average: 489 million barrels) -- falling below maximum of the five-year average range for the first time since mid-April.

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From the 2 November 2020 issue of The Energy Bulletin:

Oil posted its largest monthly drop [in the futures market] since March as renewed lockdown measures to contain the coronavirus threatened to upend a shaky demand recovery. Futures fell 1.1 percent in New York on Friday [10/30] to end the week below $36 a barrel, taking their cue from a broader market selloff and the worst week for U.S. stocks since March. Simultaneously, the U.S. posted a record surge in daily coronavirus infections, while new restrictions in Europe could drive the region toward another recession.

Oil futures settled near five-month lows Oct 30^th as rising COVID-19 cases continued to weigh on demand outlooks. New York settled at $35.79, and London was down to $37.46. Front-month WTI last settled lower on Jun 1st, while Brent futures were the weakest since May 29th. The slide comes as Europe's three largest economies, the UK, Germany, and France, prepare to enter partial one-month lockdowns to halt a growing second wave of the pandemic. European energy demand was already trending lower ahead of the lockdowns.

Two-thirds of the U.S. Gulf of Mexico's crude oil production was shut on Oct 28^th ahead of Hurricane Zeta. About 35 percent of the Gulf's platforms and rigs, or 231 facilities, were evacuated. Zeta was the 27^th named storm of the year, tying the 2005 record with more than a month remaining in the hurricane season. New Orleans-area refineries are returning after Hurricane Zeta knocked out power in much of southeastern Louisiana. An estimated 1.23 million b/d of crude production and 1,090 million cf/d of natural gas production remained offline on Oct 30th.

The monthly Reuters poll of 41 analysts forecasts that oil prices will continue to trade in a narrow range for the rest of the year, and the average Brent price next year will not exceed $50 a barrel. In another sign that the second coronavirus wave is hitting fuel demand, oil trading firms are looking for supertankers to use as floating storage for diesel. Analysts are expecting lower than usual diesel demand from the industrial, heating, and transport sector in the coming months.

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Selected highlights from the 30 October 2020 issue of OilPrice.com’s Oil & Energy Insider include:

Oil prices plunged [the last week of October] after spending months trapped in a narrow range around $40 per barrel. Renewed national lockdowns in France and Germany rattled financial markets, while the U.S. case count for covid-19 remained at record levels and may continue to rise. “As lockdowns begin to bite on demand concerns across Europe, the near-term outlook for crude starts to deteriorate,” said Stephen Innes, chief global market strategist at Axi. In early trading on Friday [10/30], WTI fell to $35 per barrel and Brent was at $37.

ExxonMobil warns of massive $30 billion write down. ExxonMobil posted a third-quarter loss of $680 million, or 15 cents per share, a smaller loss than expected. Exxon’s debt has climbed to $68 billion, more than triple since 2014. But the bigger news was that CEO Darren Woods warned that the company may take a $30 billion write-down, largely related to its North American shale gas assets. Exxon overpaid for XTO Energy more than a decade ago, right before a steep drop in natural gas prices.

ExxonMobil to cut jobs; keeps dividend flat. ExxonMobil kept its dividend flat for the first time in nearly 40 years. But with a dividend yield in excess of 10%, the oil major will be under pressure going forward. Exxon will also cut 15% of its workforce, which will translate into job losses of about 1,900.

OPEC members reluctant to extend cuts. Three of the biggest OPEC producers behind Saudi Arabia may not be on board with extending the current cuts into next year. Iraq, the United Arab Emirates (UAE), and Kuwait are reportedly not particularly inclined to support a rollover of the cuts of 7.7 million barrels per day (bpd), because such cuts are too deep for their economies and budget incomes to sustain.

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.