Equity Strategy
Energy – Ready for Take-Off?
Thu 3rd December, 2020

Oil prices averaged ~US60/bbl across 2018/2019 leading into the COVID-19 pandemic. Today, the oil price is just $US45/bbl for both WTI and Brent. While oil has recovered from COVID-19 lows in the $US20s in 2Q20, global oil demand remains materially below levels seen in late 2019.

In this week’s view on Australian equities, we look into the likely demand and supply drivers of oil across 2021/22 as the world begins its post-COVID-19 cyclical upswing.

While the demand for oil in 2Q20 fell at a pace like we have never seen before, the potential for a constrained oil supply from 2023 onwards could be the precursor to higher oil prices relative to expectations. In our view, the potential for supply tightness could drive a further leg of recovery in the oil price. We examine:

  • The destruction and recovery of oil demand
  • CAPEX constraints on supply growth
  • Market expectations for pricing
  • Our overweight position in the energy sector

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    Written by

    John Lockton , Australian Equities

    John is a leading investment strategist with 20 years experience.

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