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Oil Update—November 2020

When I announced my forecast last month, West Texas Intermediate was hovering close to $35 per barrel. As I prepare this post, WTI is slightly above $45 per barrel.

So what has changed? Pfizer’s and Moderna’s announcements of their vaccines changed the outlook for oil prices. Also, OPEC+ is expected to roll over its production quotas for another three months when concludes its meeting tomorrow, December 1.

Because of the vaccine announcements and the expected OPEC+ rollover, both of which will lead to an increased investor risk appetite for oil, I am increasing my WTI price forecast to range between $40 to $50 per barrel for December.

Cumulative Number of COVID-19 Cases in Alberta

On the negative side, COVID-19 will continue to spread. In my province of Alberta, cases are increasing at an alarming rate. The same applies for much of the United States and Europe. On the positive side, vaccinations should begin shortly. I hope by late summer or early fall, all those who want vaccines will have had an opportunity to be vaccinated. And as mentioned, I expect OPEC+ to roll over its production quota for another three months, which should provide support while COVID-19 continues to spread.

As seen during the past month, oil prices and oil equities have spiked. I expect further gains for equities in the months ahead. As investors become more comfortable that the pandemic will recede in the months ahead, I expect more confidence in oil equities. That said, the path forward may continue to be volatile. If you do plan to invest in oil equities, I encourage you to look at those equities with financial and managerial strength. Investors are still wrestling with how much society will change on the other side of the pandemic.

Number of COVID-19 Cases in Alberta per Day

Because of the surging number of COVID-19 cases, I will reiterate my advice from last month. Because COVID-19 is a serious illness that can lead to serious complications and in some cases death, especially for those with compromised immune systems or advanced age, I encourage everyone to wash their hands frequently, wear a mask when in public, maintain a safe distance from others, and limit contact with others. Also, keep a record of activities and contacts over the past fourteen days, so that if you if you do fall victim to the coronavirus, you can provide contact tracers with good information. If we take those measures, then there is a greater likelihood that shutdowns will not be required.

I included two charts showing the number of cases of COVID-19 in Alberta.

I hope everyone remains safe and well.

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