As we approach the end of 2020, we are reminded of statistical certainty regarding oil price predictions. If you set anything other than an interval, you will be found to be wrong. And even for forecasters and predictors who set a range, the probability that the actual price falls within the chosen range is as safe as a price range selected by throwing an arrow at a number on the wall. This has never stopped oil price forecasters.
We rounded up some of our favorite predictions of this year’s oil price. And, although you think it may not be a fair exercise, given the black swan event, such as the coronavirus pandemic, we will remind you that the predictions made even in the midst of the pandemic were quite suspicious.
US Energy Information Administration (EIA) has the unfortunate position on our list to go first. It is January forecast for 2020, oil prices for both WTI and Brent would later turn out to be high – not surprisingly given the events that were to take place. While there have been reports that an outbreak has been occurring since the early days of January 2020, it was only on January 13 that the first Covid-19 case was known to have escaped China’s borders. But when the EIA released its STEO on January 14, demand for craters due to the upcoming pandemic was not even on the radar. What was on his radar? Tensions between the United States and Iran and the corresponding fear that there will be a disruption of oil supplies in the Middle East.
Its forecast for the price of an average WTI barrel throughout 2020 was $ 59.50 per barrel, while its 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 closed the day at just $ 54, as the already pre-pandemic world feared a weakness. of oil demand.
Over the next few months, the EIA adjusted its price forecasts downwards, but always tracked prices that had fallen in the previous month.
While the EIA fired too high because it had no prior knowledge of Covid-19, Morgan Stanley maybe shot too low. Morgan Stanley issued a Brent forecast in May, at the height of blockages that could best be described as safer-is-not-always-better. Brent’s prediction, made near the end of May, was that Brent would trade at $ 40 a barrel by Christmas. Of course, Brent received his own vaccine when several vaccine candidates proved effective and limited launches were set just weeks before Christmas. Then, OPEC discussed that it did not ease its production cuts, as promised, injecting additional optimism into the market. By December 3, the day OPEC + finally reached an agreement to slightly increase production in January alone, Brent had reached $ 48.70 a barrel – 22% off Morgan Stanley’s projections.
ExxonMobil it’s not your traditional market analyst, but it certainly has more skin at stake than most analysts. At the end of November, which can hardly be considered a price forecast for 2020, the American supermajor fell oil price expectations by 2025 to between $ 50 and $ 55 a barrel. Exxon’s oil price forecasts are considered proprietary, so this rare idea (courtesy of WSJ) should not be dismissed as what it believes will be the next five years of oil prices. Exxon’s 2025 forecast for Brent was $ 62.
Related to: The jump in oil to the significant extraction of gross inventory
Speaking of safety, there is safety in numbers. Just two weeks after the EIA released its oil price forecasts for 2020 in January, Reuters conducted a poll of 50 economists and analysts. But just because there were more of them doesn’t mean they were right. In fact, this forecast, which set the average price of Brent in 2020 at $ 63.48, serves to highlight how wrong everyone was. a April poll the average block by Reuters sang a very different song, expecting Brent to average only $ 35.84 per barrel.
Goldman Sachs made a sharp drop in the price of oil Forecast Q2 near the end of March – in fact, it was the second downward adjustment in just a few short weeks, as the pandemic took effect in oil markets. For the second quarter, Goldman estimated that Brent will average $ 20 a barrel. While the average for April rose below $ 20, Brent’s average price in May reached only $ 30 a barrel, and by June prices had recovered to $ 40.
By June, as Brent traded nearly $ 40, optimism was beginning to return to the market. As a result, Bank of America (BofA) in June adjusted upwards its forecast for a barrel of Brent over 2020 at $ 43.70 (up from its previous estimate of $ 37). While BofA has come closer than many (which is to be expected, with almost half of the year being placed in the Known category), BofA will likely end up with about $ 10 too low. When he made the forecast, of course, the optimism of the vaccine candidate was not yet present on the market. What BofA also could not have predicted was the market sentimentality towards this optimism and the complete and very atypical disregard for what would be the growing expansion of gross stocks in the United States.
It is advancing rapidly in September, when many of the roadblocks around the world have subsided. Barclays Commodity Research raised the forecast for Brent for 2020 – with three months left for the year – to $ 43 a barrel, citing a potential disadvantage limited to the prospects of its request for the “continued restriction of OPEC +” after the cartel decided to hold members accountable for failing to meet their production reduction quotas and “the evolving response function of governments and the general public, against the threat of the virus. “Brent was trading at almost $ 43 at the time of the forecast increase.
No matter where the forecasts seemed to land, no forecast made sense this year, unless, of course, they made projections in the last month or so of the year. These January forecasts – even the best of the best – demonstrate how volatile the oil market has become and can serve to extend the forecast intervals we see offered for 2021 and beyond.
By Julianne Geiger for Oilprice.com
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