Crude oil demand is likely to rebound next year following the promising news about a vaccine against the novel coronavirus, according to Fitch Solutions.
In its latest Global Commodities Strategy report, the economic research firm noted the strong chances of a Covid-19 vaccine getting emergency approval soon as a major factor for the recovery in global oil demand.
Fitch also noted plans by OPEC+ to extend its oil production control deal at current restriction levels. Initial plans by the cartel called for a cut of some 7.7 million bpd until the end of 2020, followed by a relaxation of the restrictions by about 2 million bpd beginning in January 2021.
However, prices have remained depressed because of the resurgence in Covid-19 cases in Europe and the United States, which prompted discussions of extending the current cuts and even the suggestion of deepening them again.
“We maintain a bullish view into 2021, based on the core assumption of a rollout of an effective vaccine in the second half of 2021 and a broader global economic recovery supporting a return in oil demand,” Fitch analysts said, noting, however, that the lockdowns in Europe and some U.S. states will limit the upside potential for crude oil prices.
For next year, Fitch expects Brent crude to average $48 a barrel, rising to $50 a barrel in 2022. That’s a downward revision from an earlier forecast that saw Brent crude averaging $51 a barrel next year, rising to $53 a barrel in 2022.
Oil prices jumped by 10 percent last week, after Pfizer announced potentially promising efficacy results for its vaccine candidate. The benchmarks rose again this week following a similar announcement by Moderna, which reignited hopes of a vaccine soon to be available. However, analysts have warned that even if a vaccine is approved under an emergency procedure, it will take months for it to be distributed widely enough for mass vaccinations.
By Charles Kennedy for Oilprice.com
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