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It seems that the second wave of COVID-19 inspired shutdowns has convincingly tilted the most recent Petroleum Status Report firmly into bearish territory. Oil has failed to advance and traders are very much now questioning their commitment to their long exposure. Notwithstanding, strategists at TD Securities are optimistic on the oil market into 2021.

Key quotes

“In sharp contrast to what many bulls were looking for following an accretive OPEC+ meeting, the EIA report showed crude oil inventories unexpectedly jumped a record 15.19 million bbls vs an expected one million bbl decline.”

“In the short run, the raging pandemic and the associated rising death toll will very likely continue to keep demand weak, as it will take time to deploy the highly effective vaccines. This could translate to petroleum market weakness and higher inventories in the near-term, which could take prices materially under $45/b, before a robust and sustained rebound materializes.”

 “TD Securities sees WTI approaching $50/b, once the economy normalizes. The Biden Administration and other major economies around the world will want to provide sizable stimulus, which is expected to drive demand higher in the US and around the world. At the same time, OPEC + is likely to increase production in a way such that the current excessive inventories continue to be unwound, with US shale and other producers only mustering modest supply gains for the foreseeable future.”