Vol. 25, No.48 Week of November 29, 2020
Providing coverage of Alaska and northern Canada's oil and gas industry

Spectacular recovery

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ANS surges up 24% in 24 days; oil prices hit highest level in 8 months

Steve Sutherlin

Petroleum News

Nov. 24 will be a day to remember in the annals of oil price history, as the day when optimism for a return to post-COVID normalcy took flight. It was the day oil prices broke out of an eight-month-long trading trough that has dogged prices since the pandemic hit in early 2020.

Alaska North Slope crude jumped Nov. 24 to a post-COVID high close of $47.02 per barrel, a $1.74 increase for the day.

West Texas Intermediate flirted with the $45 mark, closing at $44.91, a gain of $1.85. Brent closed at $47.86, up $1.80.

At Petroleum News press time Nov. 25, WTI was trading at $45.49, up 59 cents and Brent was at $48.44, up 58 cents.

As Thanksgiving approaches, the spooky gloom of October has receded from consciousness like a bad nightmare. In October, oil posted its largest monthly drop since March as renewed lockdown measures spurred by a coronavirus surge stoked fears that demand recovery was doomed.

Oil has climbed out of the abyss in 24 days of November, risen from the first day of trading Nov. 2.

ANS led the march higher, from its close of $38.06 on Nov. 2 - up $8.96 or 24% month-to-date. WTI closed at $36.81 Nov. 2, up $8.10 or 22% month-to-date. Brent closed at $38.97 Nov. 2, up $8.89 or 23% month-to-date.

The recovery is even more spectacular, when considered from the $33.64 inter-day trading low of WTI on Nov. 2; the Nov. 24 close of $44.91 represents a gain of some 34%.

The fortunes of black gold were boosted by the advent of several other extremely valuable liquids - three vaccines for COVID-19.

AstraZeneca Plc broke the news early in the week that its COVID-19 vaccine could be up to 90% effective.

Pfizer Inc. with partner BioNTech SE and Moderna Inc. earlier released trial data showing their COVID-19 vaccines to be about 95% effective at preventing the illness.

Equities too seem to have shaken off Octoberís malaise, a month of a broad market selloff, ending with the worst week for U.S. stocks since March.

Nov. 24 was a big day for stock prices. The Dow Jones Industrial Average crossed above 30,000 for the first time Nov. 24, having staged a rally of more than 60% from its March lows.

COVID vaccine news, aided by an increase in forward visibility on the U.S. presidential election outcome, fueled the surge.

November was especially good to oil stock - Nov. 24 was the apex of a broad rally in oil company equities. Chevron, for example, rallied to a close of $95.62, up 36% from the beginning of the month and up 85% from its March low of $51.60.

Whither demand?

The stock market is forward looking, and quality names like Chevron may well have lifted into a higher trading range heading into 2021 as investors eye future profits resulting from higher production and prices, streamlined operations, and accretive acquisitions. Oil prices are another animal.

Stock shares donít pile up and tax storage capacity, and while supply and demand are also in play with equities, oil demand ultimately is reliant on consumption of the commodity.

Notwithstanding current benchmark prices over $45, the $40 to $45 channel at the center of recent price movement is likely still intact, as it was even in the face of Octoberís sub-$40 excursions.

Before the recent coronavirus surge, analysts were hopeful that demand would cross above supply near the end of December, christening a new trading level for oil, but now most analysts and the Organization of Petroleum Exporting Countries see that line being crossed in mid 2021.

On the supply side, the largest factor now looming is the OPEC+ meetings Nov. 30 and Dec. 1 where the trade group is expected to reach a decision on whether to extend its current level of production curbs.

On the demand side, total October domestic petroleum deliveries in the United States are a bright spot - up 5.5% from September, according to the American Petroleum Instituteís latest monthly statistical report. Deliveries are 9% below the same month in 2019.

American consumers seem to have found private automobile travel to be a safer alternative to other options, spurring a price surge and record sales of used cars, and a tight supply of new ones. Those cars being out on the road rather than dealer lots bode well for gasoline demand.

The API numbers however, show a decrease of 0.9% in October motor gasoline deliveries versus September. That may simply be a seasonal change, as winter sets in. At 8.5 million barrels per day, October deliveries were 8.9% lower than October 2019.

Holiday freight loads have propelled October distillate deliveries to 3.9 million bpd, up 5.1% from September but down by 8.0% year over year.

Jet fuel deliveries of 1 million bpd lifted 10.9% in October versus September, but still are lagging other fuel categories - down by 40.3% versus October 2019.

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