Oil prices are unlikely to see a significant improvement in 2021, as novel coronavirus variants and the travel restrictions it causes threaten already weakened fuel demand.
In a survey conducted by analysts in the second half of December, Brent crude oil prices are estimated to be $ 50.67 per barrel next year. This is higher than a survey that predicted an average price per barrel of $ 49.35 in 2021 last month.
According to the survey, West Texas Intermediate (WTI) crude oil futures are expected to average $ 47.45 per barrel in 2021. This is higher than the November’s consensus of $ 46.40 per barrel.
Recovery of oil demand will depend on the success and rate of spread of vaccines developed to combat the virus. According to some, it is not expected to return to pre-pandemic levels before late 2022 or 2023.
Mutated new strains of viruses could complicate the outlook and lead to harder lockdowns that will disrupt the crude oil demand outlook for the first quarter of 2021. Taking all developments into account, OPEC and its allies’ actions to increase production will be the focused interest for the first half of the year.
OPEC producers and allies, including Russia, agreed to slack off production cuts by 500,000 barrels a day for January. The group will meet on January 4 to discuss the policy, including the possible additional flexibility of 500,000 barrels in February.
If OPEC + loosens production cuts too quickly, the price drop is inevitable. Otherwise, if prices rise significantly, a crack may arise and US shale production will rise again.
Brent and WTI futures are down more than 20% this year though Brent has more than tripled since April, when it hit a more than 20-year low of $15.98 per barrel.