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Decline in Crude Oil Prices


Given the deterioration in macroeconomic conditions, we see a decline in crude oil back to the bottom of the 2-month consolidation lows at $37.32. Certainly, an extension of the negative political/stimulus situation combined with record infection surges in the US, Italy France Germany and Poland adds to demand destruction fears. Cushioning prices against a wholesale washout is evidence from last week that the Chinese demand story has been extended into the future, with refiners recently buying for delivery in January.


We do not deny the potential bullishness of the long-term demand flowing to China, and the ability of the US to garner a large portion of that business through their new export facilities. However, in the near-term, US underground storage remains 9.1% above the 5-year average for this time of year and the overall level of working gas in storage still sits very close to all-time highs.

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