As the end of 2020 approaches, we are reminded of one statistical certainty regarding oil price forecasts. If you put something other than a series, you will be proven wrong. And even for the forecasters and forecasters who do determine a range, the probability that the actual price will fall within the selected range is just as certain as a range of prizes selected by placing an arrow on the number on the wall. throw. That never stopped oil price forecasters from letting it go.
We have summarized some of our favorite oil price forecasts for this year. And while you may think this is not a fair exercise, given the black swan event like the coronavirus pandemic, we’ll remind you that the predictions made even in the midst of the pandemic were quite suspicious.
The US Energy Information Administration (EIA) has the unfortunate position on our list to go first. His January forecast for 2020, oil prices for both WTI and Brent would be high later – not surprising given the events that were about to unfold. Although there were reports that an outbreak was already brewing in the first few days of January 2020, the first Covid-19 case would not have escaped to China’s borders until January 13. But when the EIA published its STEO on January 14, the demand for oil due to the future pandemic was not even on its radar. What was on the radar? Tensions between the United States and Iran and the corresponding fear that there would be a disruption of oil supplies in the Middle East.
Its forecast for the price of an average WTI barrel during 2020 was $ 59.50 per barrel, while the Brent forecast was for $ 65 per barrel. That compares with 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 because the world had already – pre-pandemic – feared a weak oil demand.
The EIA adjusted its price forecasts downwards for the next few months, but always pushed down prices that had fallen the previous month.
While the EIA shot too high because it had no knowledge of Covid-19, Morgan Stanley maybe shot too low. Morgan Stanley issued a Brent forecast in May at the height of the exclusions that can best be described as safer – is not always better. Brent’s prediction, which came at the end of May, was that Brent would trade at $ 40 a barrel by Christmas. Of course, Brent received its own vaccine when several vaccine candidates proved to be effective and limited implementation would begin only a few weeks before Christmas. OPEC then held talks on weakening its production cut as promised, injecting further optimism into the market. By December 3, the day OPEC + finally reached an agreement in January to boost production only slightly, Brent reached $ 48.70 a barrel – 22% above Morgan Stanley’s forecasts.
ExxonMobil is not your traditional market analyst, but it 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 American supermaster lowered his price oil price expectations until 2025 to between $ 50 and $ 55 per barrel. Exxon’s oil price forecasts are considered own, and therefore this rare look (courtesy of the WSJ) should not be rejected in the next five years’ oil prices. Exxon’s forecast for Brent for 2025 was $ 62.
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Speaking of safe, there is safety in numbers. Just two weeks after the EIB published its 2020 oil price forecasts in January, Reuters conducted a poll of 50 economists and analysts. But just because there were more of them, does not mean they were right anymore. In fact, this forecast, which linked Brent’s average price in 2020 to $ 63.48, helps to show how wrong everyone wash. ‘A April poll mid-lockdown by Reuters sang a very different tune and expected Brent to cost just $ 35.84 a barrel on average.
Goldman Sachs has sharply reduced its oil price Q2 forecast by the end of March – this was the second downward adjustment in a few short weeks as the pandemic took its toll on the oil markets. For the second quarter, Goldman estimated that Brent would cost an average of $ 20 a barrel. While the average of April was finally less than $ 20, the average Brent price of May was only $ 30 per barrel, and by June the prices had recovered back to $ 40.
While Brent traded at $ 40 by June, optimism began to return to the market. As a result, Bank of America (BofA) in June upward adjusted its forecast for a Brent barrel over 2020 to $ 43.70 (compared to its previous estimate of $ 37). While BofA was eventually closer than many (which can be expected with almost half of the year in the Known category), BofA is likely to be about $ 10 too low. When it made the prediction, of course, the optimism of the vaccine candidate was not yet available in the market. What BofA would also not have been able to predict was the sentimentality of the market over this optimism and the overall and very atypical disregard of the large stocks in the United States.
Fast forward to September, when many of the global exclusions have subsided. Barclays Commodity Research increased its forecast for Brent for 2020 – by three months to the year – to $ 43 per barrel, referring to the limited potential disadvantage of its prospect of demand for ‘continued OPEC + control’ after the cartel held members responsible for failing to meet their production rebate quotas, and ‘the evolving response function of governments as well as the general public against the virus threat. Brent was trading at almost $ 43 at the time of the forecast increase.
No matter where the forecasts looked, no forecaster got it right unless, of course, they made forecasts over the past month or so. These January forecasts, even if they are the best of the best, are an indication of how volatile the oil market has become, and it could serve to expand the forecast ranges for 2021 and beyond.
By Julianne Geiger for Oilprice.com
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