Colo.’s Hwy. System Ranks in Bottom Half

December 2, 2020 Lost Creek Guide Page 5

How High Can Oil Prices Go In 2021? Colorado’s Highway System Ranks in Bottom

By Tsvetana Paraskova Half of Nation, Report Finds

Progress in vaccine development and expectations that OPEC+ will decide in less than by Robert Davis two weeks to roll over the current cuts for three months instead of easing them from Janu- (The Center Square) - Colorado’s highway system ranks 38th in overall performance ary 2021 give bulls hopes that the oil market will regain some semblance of a balance next and cost-effectiveness in a nationwide report on highways. year, pushing prices higher. Colorado’s ranking in the Reason Foundation’s Annual Highway Report represents a

Currently, the general consensus among analysts and agencies is that oil prices will two-spot drop from last year’s ranking. The report, which uses 2018 data, said funding indeed see an upside in 2021 as above-average inventories will draw down with a global for state-owned roads across the country saw a 9% increase that year, up to $151.8 billion. economic and oil demand recovery. The libertarian

Several bullish signals in recent weeks have made oil market participants and analysts think tank›s remore optimistic about the oil market next year, despite the current second wave of COVID-19 infections sweeping across Europe and the world’s biggest petroleum consumer, the United States. First, crude oil and petroleum inventories in the U.S. are still above five-year average levels, but they have dropped from their peaks earlier this year, according to estimates port found states like North Carolina and Texas did the best job from Reuters market analyst John Kemp based on EIA data. of combining

Next, oil demand in Asia has visibly strengthened in recent weeks, giving the oil market performance and hope that at least in one region, demand is strong in the fourth quarter. cost-effectiveness

Then, hopes of an effective vaccine receiving FDA approval soon also instill hopes that while New York life could return to some form of normality at some point in 2021. and California

Related: Something Highly Unusual Just Happened To Chinese Crude Stockpiles All were two of the these factors resulted this week in the shallowest contango in the front-month and six- lowest-ranked. month spread in the Brent Crude futures market since July, suggesting that market To determine participants now expect vaccines and economic recovery next year to help market the overall rankrebalancing, which would push oil prices higher. Current expectations about oil prices point to gains, especially in the latter half of 2021. The EIA expects in its November Short-Term Energy Outlook (STEO) that as global oil demand rises, inventory draws in 2021 will cause some upward oil price pressures, and ings, Reason did a state-by-state comparison of highway spending per mile of responsibility and «system performance,» a measurement of pavement quality, congestion, and safety. Brent is expected to average $47 a barrel next year, up from $44 per barrel early on Friday. Colorado ranked in the middle of the pack in highway spending, but near the bottom

The latest monthly Reuters poll of analysts, before the vaccine progress announce- in pavement quality and safety. The highest ranking Colorado received was No. 18, for its ments, expected Brent prices to average $49.76 per barrel in 2021, down compared to high count of structurally deficient bridges. $50.41 expected in the previous survey. «To improve in the rankings, Colorado needs to improve its rural Interstate pave-

However, risks to oil prices are likely still skewed to the downside, as surging COVID ment condition. Colorado is in the bottom five of all states in rural Interstate pavement cases in the U.S. and Europe are prompting renewed lockdowns, curfews, mask mandates, condition. Compared to neighboring states, the report finds Colorado›s overall highway and restrictions, which would weigh on economic activity and transportation demand in performance is worse than New Mexico (ranks 16th), Utah (ranks 17th), and Wyoming the near term. The uncertainty about how bad oil demand will be hit and how fast devel- (ranks 36th),» said Baruch Feigenbaum, lead author of the report and managing director oped economies and demand would recover from this second wave will continue to pres- of transportation policy at Reason Foundation.sure prices to the downside, at least early next year. The vaccine impact on oil demand and spot oil prices is not expected to manifest in the first half of 2021, the International Energy Agency (IEA) said last week. Moreover, in the coming week, fuel demand in the U.S. will not receive its usual Thanks«Colorado is better than some comparable states like Washington (ranks 45th), but worse than others such as Arizona (ranks 23rd),» he added. State legislators have done their part by increasing the total funds budgeted for transgiving travel increase as only 35 percent of Americans will be traveling for the holiday, portation projects. However, each time Colorado faces a financial squeeze, the transpordown from 65 percent in 2019, even if Thanksgiving gasoline prices will be the lowest tation jar thins out. since 2016, a GasBuddy survey showed. For example, Colorado faced a $3.3 billion budgetary shortfall after the first round

“The survey results show continued anxiety from motorists even with the lowest Thanks- of COVID-19 lockdowns. Transportation took a 6% cut once lawmakers returned from giving gas prices in years, highlighting the challenges we’re facing in this pandemic,” said recess in late May, adding up to over $127 million in losses. Patrick De Haan, head of petroleum analysis at GasBuddy. However, even if state transportation agencies kept all of the apportioned funds, there

Related: Climate Targets Could Slash Natural Gas Investment By $1 Trillion is still a wide gap between disbursements and taxpayer needs.

The muted holiday traveling will come after a build in U.S. gasoline inventories even if The Colorado Department of Transportation›s most recent budgetary deficit regasoline production dropped. port from 2017 estimates the department will need $2.5 billion over the next 10 years to In the week to November 13, gasoline inventories rose by 2.6 million barrels, compared with a decline of 2.3 million barrels for the previous week, the EIA said in this week’s inventory report. Gasoline production averaged 9.1 million bpd last week, versus 9.3 million bpd a week earlier. Distillate inventories dropped, but they are still some 11 percent higher than the five-year average for this time of the year. meet its goal of an 80% drivability life for state roads. Governor Jared Polis› 2021 budget proposal includes $220 million for public works and infrastructure. This represents a 14% increase from 2020, but still $30 million under what CDOT needs to maintain the 23,000 miles in state roads under its jurisdiction.

Another concern for U.S. inventories and prices is that stocks at Cushing—the desig- Similarly, the American Society of Civil Engineers estimates additional road repairs, nated delivery point for NYMEX crude oil futures contracts—have risen to 81 percent of traffic crashes and time lost in congestion costs taxpayers $7.1 billion annually, or as capacity. EIA data showed that commercial crude oil stocks at Cushing rose by 1.2 percent much as $2,306 per driver in the Denver metropolitan area. in the week to November 13. At 61.6 million barrels, inventories are 39.3 percent higher than at this time last year.

The pace of recovery from the current challenges to oil and fuel demand and the rate of stock drawdowns next year will determine the trend in oil prices until safe and effective vaccines become available to a critical mass of people. 8 a.m. to 4:30 p.m.

“Once rolled out, the vaccine should ensure a recovery in oil demand back towards trend. But first inventory levels and spare capacity held by OPEC+ need to be reduced and this may take us towards the second half of 2021 before a meaningful $15.50 oil price recovery can occur,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, said this week.

By Tsvetana Paraskova for Oilprice.com $1.29 per gallon will call or route

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