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Oil: Staring into the Abyss

Oil: Staring into the Abyss

A bleak picture just got even bleaker.

In its monthly oil market report today, the Organization of the Petroleum Exporting Countries (OPEC) cut its forecast for 2020 global oil demand by 400,000 barrels, from 90.63 million barrels per day to 90.23 mb/d.

This new estimate for 2020 would mark a 9.5% decline to 2019’s level of oil demand:

Real Vision Blog - Chart World Oil Demand in 2020 and 2021

In addition, OPEC downwardly revised its forecast for 2021’s global oil demand by 770,000 barrels, from 97.63 million barrels per day to 96.86 mb/d.

Because of 2020’s aberrantly weak levels of oil demand, however, this lower figure of 96.86 mb/d for 2021 would still mark a 7.34% year-over-year increase:

Real Vision Blog - Chart 9.5% decline

One would think this news would have those with an exposure to “black gold” shivering. But the spot prices for both Brent Crude and Western Texas Intermediate were actually flat for the day:

Real Vision Blog - Chart Western Texas Intermediate
Real Vision Blog - Chart Brent Crude

The futures curve, however, continues to arch itself into a still-deeper contango:

Real Vision Blog - Chart Brent Crude Oil Futures Curve
Source: Bloomberg

The spread between front month and illustrates this curve-steepening in greater detail:

Real Vision Blog - Chart Brent Crude Futures Spread

There’s also quite a difference between OPEC’s forecasts and those that come from its western counterparts:

Real Vision Blog - Chart Oil Demand Forcast
Source: Bloomberg
Real Vision Blog - Chart Oil Demand Forcast
Source: Bloomberg

Maybe the flatness in today’s oil prices is due to market participants being “non-believers” in OPEC’s forecasts?

For more on oil, check out today’s Real Vision Daily Briefing, where I discuss OPEC’s monthly report and more with senior editor Ash Bennington.

Watch the Full Daily Briefing
RELATED CATEGORIES: Daily Briefing, Market Analysis, Oil

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Mark Yusko

Morgan Creek Capital Management, Co- Founder, CEO, & CIO

Mark Yusko is the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets.

Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office. Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation.

Mr. Yusko is again at the forefront of investing through Morgan Creek Digital Assets, which was formed in 2018. Morgan Creek Digital is an early stage investor in blockchain technology, digital currency and digital assets through the firm’s Venture Capital and Digital Asset Index Fund.

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SkyBridge Capital, Founder & Co-Managing Partner

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