On Monday, October 19 the latest OPEC+ JMMC meeting did not give any surprises to the oil market. It was uneventful. There was no recommendation to change the previously approved policy for 2021 reducing the group’s collective output cuts to 7.7mln bpd from 9.7mln bpd. However, one interesting observation was that both Russia and Saudi Arabia highlighted the uncertain demand outlook given COVID-19’s recent return. It is worth considering that in more detail as there could be some factors dragging on oil prices into November.

The rise of home working

More and more people are working from home. There are fewer business trips and less frequent commutes at the moment. However, this could become a permanent change impacting fuel demand in an ongoing way. In Singapore, for example, nearly 50% of people are working from home. Look at the drop in mobility on the table below.

Some of this home working will be permanent as the digital age allows for perfectly adequate work from home.

The drop in travel

Travel traffic is way down. Flightradar 24, which provides a real-time online flight tracking service, sees a coming 3.5mln bpd decline in jet fuel consumption. They note a 48% drop in global commercial flights.

The levels of jet fuel and gasoline inventory at major ports such as Amsterdam have also risen to multi-year highs. Global road traffic is way down with San Francisco road traffic plunging 70%. The TomTom traffic index suggests that major cities’ traffic volumes were 24% lower during the week of October 09 than a year earlier.

Even though OPEC expects global demand to exceed the pre-pandemic levels in 2022 that could be an overly optimistic projection. The widespread adoption of electric vehicles, which is almost a foregone conclusion now, which will in the longer term also weigh on oil demand. However, in the short term, low oil prices will slow the adoption of electric vehicles.

Dates for the diary

• JMMC meeting is November 17
• OPEC/OPEC+ meeting is November 30/December 01

It will be interesting to see how these meetings respond to the mounting pressures that Saudi and Russia alluded to in their last meeting. Any talk of production cuts will support oil prices, but falling demand will cap them in the meantime. Key resistance in US oil is found at $45 on the weekly chart and near term sellers can be expected at that level as long as COVID-19 demand issues remain. One risk to this outlook is the successful completion of a COVID-19 vaccine which would boost oil on improving risk sentiment.