COVID-19 isn’t going away anytime soon
Let’s start on the demand side of the equation for oil. We don’t know when the U.S. economy or the global economy will return to “normal,” but it doesn’t appear it’ll be anytime soon. In recent reports, the American Enterprise Institute and the Center for American Progress outlined plans for reopening the economy and what to do if and when COVID-19 returns periodically. And neither report is particularly bullish on an economic recovery anytime soon.
The American Enterprise Institute pushes for a regional approach to handling COVID-19 and getting the economy going, triggering into and out of stay-at-home advisories as case counts grow and shrink. The implication is that the U.S. would go in and out of some level of quarantine for the foreseeable future, leading to what it’s dubbing the “80% economy.” With a vaccine not expected for 18 to 24 months, the ups and downs of the economy could last some time, hurting oil demand as a result.
The Center For American Progress report has similarities but pushes for massive increases in testing and contact tracing. There would also be restrictions on travel and only a slow reopening of parts of the economy. There’s no plan for a rapid recovery.
In both plans, it’s going to be many months, if not a year or more, before COVID-19 is under any kind of control and the economy can fully reopen again. For oil demand and oil prices, that could mean a rough 12 to 24 months ahead.