United States Oil Fund ETF (ETF: USO) – In Shaky Oil Market, Analyst Says Stick To Status Quo, Wait For COVID-19 Vaccines

The full or partial lockdowns of the pandemic this winter could put oil demand at greater risk, the panel of OPEC’s Joint Ministerial Monitoring Committee said on Monday.

The OPEC committee should stick to the cuts already in place and resist COVID-19 vaccines, said SEB commodities analyst Bjarne Schieldrop, or risk damaging the oil market with high inventories for another year or two. .

“In the main scenario, the market could absorb the additional 1.9 million barrels per day from OPEC + starting in January 2021, assuming a more gradual recovery in global oil demand,” the analyst said in a note. .

A second wave and COVID-19 oil: The combination of a second wave of coronavirus infections and a surge in Libyan oil production could leave the market with a huge surplus in the first half of 2021, Schieldrop said.

“The seriousness of the situation and this possible scenario of a surplus of 4 million blb / day in the first half of 2021 is at the center of the JMMC discussions today,” said the analyst.

“So far, there is no sign that plans have changed and we know since March, when Saudi Arabia and Russia collapsed, that Russia is not at all ready to cut further and would rather continue to produce at a steady normal rate with an annual rate. small and marginal “. growth, but the logic is different now. ”

COVID-19 Vaccine Expectations: The market expectation is that different COVID-19 vaccines will be released during the first half of 2021, largely unleashing the global economy, and also the demand for oil, Schieldrop said.

“It therefore makes sense to keep holding back supply for longer until Q1 and Q2 2021 because salvation could come to the OPEC + bailout in mid-2021 in the form of vaccines,” the analyst said.

If OPEC + allows the market to run into a large surplus in the first half of 2021, it could risk damaging the oil market for another year or two with even higher inventories and depressed oil spot prices, according to the SEB.

The next OPEC + JMMC meeting is scheduled for November 17.

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