After consolidating for the last few days near recent highs, crude oil and crude ETFs tumbled toward $50 a barrel amid news that OPEC’s crude oil export revenues for 2020 could fall to $323 billion.
The news that the cartel’s revenues could decline came from the U.S. Energy Information Administration, which said in a new report that this would represent the lowest revenue level in almost 20 years. This drop would represent almost half of the 2019 revenues, which were $595 billion.
West Texas Intermediate crude oil fell nearly $2 to $51.89 a barrel, along with Brent crude which dipped as well. Meanwhile, Crude ETFs dropped on Friday, with the United States Oil Fund (USO) declining 2.58% and the ProShares Ultra Bloomberg Crude Oil (UCO) losing more than 4.68%.
As the largest exporter in the cartel, the biggest portion of OPEC’s collective oil revenues for 2020 will be for Saudi Arabia, whose oil revenues totaled $202 billion in 2019. 2020 revenues will be much more anemic due to the pandemic.
The EIA warned that the lower oil revenues will have a potentially damaging impact on OPEC economies.
“The decrease in revenues could be detrimental to member countries’ fiscal budgets, which rely heavily on oil sales to import goods, fund social programs, and support public services,” the authority said.
Despite significant deficits and a spike in loans to boost budgets, the cartel anticipates oil demand to begin recovering this year, and remains optimistic due to the new coronavirus vaccines.
In its latest Monthly Oil Market Report, the cartel prognosticated a jump in oil demand this year of 5.9 million bpd, to reach 25.9 million bpd, thanks to Asian economies, where demand climbed by 3.3 million bpd from 2020 when OPEC estimated it had dropped by as much as 9.8 million bpd.
Although it was less upbeat about demand in Europe, where oil has been ravaged by struggles to contain the coronavirus pandemic, the group was somewhat optimistic that demand trends in North America could be healthy, noting that “the recovery in transportation fuels, including gasoline, is additionally linked to developments in the labour market and gasoline retail prices. The current outlook assumes a respectable recovery in both variables.”
For investors looking for other crude ETFs to play the run-up in oil, which has been fairly steady since November, the United States 12 Month Oil Fund (USL) and the iPath Pure Beta Crude Oil ETN (OIL) are two other funds to consider.
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