Brent Crude prices are set to average $50.67 a barrel in 2021, slightly down from the price at which they traded early on the last trading day of 2020, the monthly Reuters poll of analysts and economists showed on Thursday.
The key downside risk for oil prices in 2021 will be the mutating strains of the coronavirus that threaten economic and oil demand recovery with lockdowns and travel restrictions, according to the 39 experts polled by Reuters.
In the December survey, the analysts raised their average expectations for Brent Crude prices for 2021 to $50.67 per barrel, up from the forecast of $49.35 a barrel in the November Reuters poll, but below the price at which Brent Crude traded at 7:35 a.m. ET on Thursday, $51.13.
The analysts also raised their forecast for the average price of West Texas Intermediate (WTI), expecting the U.S. benchmark to average $47.45 a barrel in 2021, compared to $46.40 in the November poll. Early on Thursday, WTI Crude prices were down by 1 percent at $47.91.
The new COVID-19 strain—first identified in the UK—and the soaring cases across the UK, other parts of Europe, and the United States are likely to cap oil price gains in the early months of 2021, while positive news on the vaccine front is set to put upward pressure on prices. Until critical masses of economically active people get vaccinated, oil prices are likely to remain under pressure.
Another factor to watch in 2021 will be the OPEC+ oil production policy and whether the cartel and its Russia-led allies will ease the cuts before demand can absorb the additional supply.
The market will get the first glimpse into the OPEC+ thinking as early as on the first trading day of 2021. The ministers of the group are meeting on January 4 to discuss production from February.
Despite renewed fears about oil demand due to the new coronavirus strain, Russia is reportedly still in favor of another 500,000 bpd increase in the alliance’s oil production from February.
By Tsvetana Paraskova for Oilprice.com
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Top medical experts in both the United States and the United Kingdom are confirming that the anti-COVID vaccines are able to control also the mutating strains of the coronavirus. Therefore, they won’t pose an additional threat to the global economy and global oil demand recovery.
OPEC+’s production cuts have prevented a collapse of oil prices and the whole oil industry in 2020 and will continue to put a solid floor under oil prices in 2021. Any tightening or easing of the cuts will be determined by circumstances in the market.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London