Saudi Arabia: Oil prices jump to an eight-month high in November
Oil prices were up notably month-on-month, driven by positive developments on the Covid-19 vaccine front. On 27 November, the OPEC oil basket traded at USD 46.7 per barrel—the highest level since 6 March—marking a 18.0% surge from one month ago. That said, the price was 27.5% lower than on the same day in 2019 and down 30.5% from the start of the year.
The rise in oil prices over the past month was primarily driven by rising market sentiment due to positive news on the development of a Covid-19 vaccine. Despite lingering distribution challenges and fears of a second strain of the virus, most analysts anticipate the vaccine to be widely available by mid-2021 boding well for economic activity next year. This likely drove fuel demand prospects higher for H2 2021, and consequently benefitted crude prices. Moreover, an unexpected fall in U.S. crude inventories in late November should have also exerted some upward price pressure.
That being said, OPEC oil output rose in October over the previous month, while lowering its global oil demand outlook in early November for the remainder of 2020 and next year, which should have capped the overall rise in prices. OPEC cut its 2020 global demand outlook by 0.3 million barrels per day (mbpd) to 90.0 mbpd marking a 9.8% fall year-on-year. The downward revision was due to weaker-than-expected demand in 3Q20 and the recent tightening of containment measures in Europe. Global oil demand prospects for 2021 were also reduced by 0.3 mbpd—compared to October’s assessment—to 96.2 mbpd.
The recent downward revision in global oil demand raised the prospects of OPEC+ delaying the previously agreed easing of output curtailment for January.
In terms of OPEC production, combined crude oil output among members increased from 24.1 million barrels per day (mbpd) in September to 24.4 mbpd in October, mostly reflecting stronger output from Libya and Iraq. Saudi output was stable at September’s 9.0 mbpd in October.