As we approach the end of 2020, we are reminded of statistical certainty when it comes to oil price predictions. If you define something other than an interval, it will be proven that you are wrong. And even for the predictors and predictors that define a range, the probability that the real price will fall within the chosen range is almost as certain as a price range selected by throwing a dart at a number on the wall. This has never stopped oil price analysts from trying.
We’ve put together some of our favorite forecasts for this year’s oil price. And while you’re thinking that this may not be a fair exercise, given the black swan event, like the coronavirus pandemic, let’s remind you that predictions made even in the middle of the pandemic were quite suspect.
The US Energy Information Administration (EIA) has the unfortunate position on our list to be first. it is January forecast for 2020, oil prices for both WTI and Brent would later prove to be high – which was not surprising given the events that were about to happen. Although there were reports that an outbreak was brewing in the early days of January 2020, it wasn’t until January 13 that the first Covid-19 case was known to have escaped China’s borders. But when the EIA published its STEO on January 14, demand for oil due to the future pandemic was not even on its radar. What was on your radar? Tensions between the United States and Iran and the corresponding fear that there would be some disruption to oil supplies in the Middle East.
His forecast for the price of an average WTI barrel throughout 2020 was $ 59.50 per barrel, while his Brent forecast was $ 65 per barrel. This compares to an average Brent price of $ 64 in 2019. But Brent fell sharply in January, and on February 4, Brent ended the day at just $ 54, as the world has already – pre-pandemic – feared a drop in demand for oil.
For the following months, the EIA adjusted its price forecasts downwards, but always chasing the prices that had fallen in the previous month.
Although the EIA fired very high because it had no prior knowledge of Covid-19, Morgan Stanley maybe a very low shot. Morgan Stanley issued a Brent forecast in May, at the height of the blocks that could best be described as safer-not-always-better. Brent’s forecast, made towards the end of May, was that Brent would trade at $ 40 a barrel by Christmas. Obviously, Brent received his own vaccine when several vaccine candidates proved to be effective and limited implementations were scheduled to start weeks before Christmas. Then, OPEC discussed not to cut its production cuts as promised, injecting more optimism into the market. On December 3, the day when OPEC + finally reached an agreement to increase production only slightly in January, Brent had reached $ 48.70 a barrel – 22% above Morgan Stanley’s projections.
ExxonMobil he is not your traditional market analyst, but he certainly has more skin in the game than most analysts. At the end of November, which can hardly be considered a price forecast for 2020, the US supermajority lowered its oil price expectations by 2025 between $ 50 and $ 55 per barrel. Exxon’s oil price forecasts are considered proprietary, so this rare glimpse (courtesy of the WSJ) of what oil prices will be in the next five years should not be ruled out. Exxon’s 2025 forecast for Brent was $ 62.
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Speaking of security, there is security in numbers. Just two weeks after the EIA published its 2020 oil price forecasts in January, Reuters conducted a survey of 50 economists and analysts. But just because there were more of them doesn’t mean they were more right. In fact, this forecast, which pegged the average Brent price in 2020 at $ 63.48, serves to highlight how wrong all was. THE April Poll mid-lockdown by Reuters sang a very different tune, hoping that Brent averaged just $ 35.84 a barrel.
Goldman Sachs made a sharp downward cut in the price of oil Second quarter forecast near the end of March – in fact, it was the second downward adjustment in just a few weeks, while the pandemic covered its price in the oil markets. For the second quarter, Goldman estimated that Brent would average $ 20 a barrel. While the April average ended up rising below $ 20, but Brent’s average price in May was only $ 30 a barrel, and by June, prices had recovered to $ 40.
In June, while Brent was trading close to $ 40, optimism was beginning to return to the market. As a result, Bank of America (BofA) in June adjusted up its forecast for a barrel of Brent in 2020, to $ 43.70 (above its previous estimate of $ 37). While BofA ended up getting closer than many (which is expected with almost half the year being placed in the acquaintance category), BofA will likely end up being about $ 10 lower. When he made the forecast, of course, the optimism of the candidate vaccine was not yet on the market. What the BofA could not have foreseen was the sentimentality of the market with this optimism and the total and very atypical disdain for what would be on the rise in oil stocks in the United States.
Let’s move forward in September, when many of the blockages around the globe had eased. Barclays Commodities Research raised its forecast for Brent in 2020 – with three months to go in the year – to $ 43 per barrel, citing a potential limited disadvantage to its demand outlook for “continued OPEC containment” after the cartel has blamed members for not meeting their production cut quotas and “the evolving response function of governments, as well as the general public regarding the threat of the virus. ”Brent was trading at almost $ 43 at the time of the predicted increase.
No matter where forecasts seemed to fall, no predictors got it right this year unless, of course, they made projections in the last month or more of the year. These January forecasts – even for the best of the best without a schedule – show how volatile the oil market has become and can serve to extend the forecast ranges we see offered for 2021 and beyond.
By Julianne Geiger for Oilprice.com
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