Despite the recent progress in vaccine development, oil prices will continue to be subdued in the first half of next year, while oil prices will not average above $50 for the whole of 2021, the monthly Reuters poll of analysts showed on Monday. The U.S. benchmark WTI Crude is set to average $46.40 per barrel next year, compared to $46.03 a barrel expected in the previous month's poll, according to the survey of 40 economists and oil analysts.
The experts see Brent Crude averaging $49.35 a barrel in 2021, slightly down from $49.76 per barrel expected in October's survey.
So far this year, Brent Crude prices have averaged $42.50 a barrel.
According to most analysts polled by Reuters at the end of November, the positive news about vaccine breakthroughs in recent weeks will not help global oil demand much early next year, as the coronavirus cases surge in major economies, leading to renewed lockdowns.
A potential vaccine rollout is set to help fuel demand in the latter half of next year, analysts believe.
Despite the recent bullish sentiment on the markets because of encouraging news about vaccine development, the outlook for global oil demand remains weak for next year, especially in the early months.
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Growing supply out of Libya, exempted from the OPEC+ cuts, could also weigh on oil prices, the analysts said in the Reuters poll.
Libya's oil supply and the demand outlook for the short term are also the key issues that the OPEC and OPEC+ meetings will be considering on Monday and Tuesday when deciding how to proceed with the oil production cuts.
There have been reports that the group is leaning toward extending the current cuts of 7.7 million bpd by another three months to March 2021, instead of easing those cuts by 2 million bpd as of January 2021.
At a snap meeting of some of the OPEC+ members on Sunday failed to reach a consensus ahead of the formal meetings this week, sources at OPEC+ told Reuters.
By Tsvetana Paraskova for Oilprice.com
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Comments
Based on this, we can expect oil prices to hit $45-$50 a barrel before the end of 2020 and rise to $60 in the first quarter of 2021. Depending on the availability of enough vaccine supplies to vaccinate a significant percentage of the world’s population, I expect prices to surge further during 2021 from $60 early in the year to $70-$80 by the third quarter. This means Brent price could average $70 in 2020.
Libya’s oil production is very precarious at the best of times because nobody can guarantee a continuation of the current truce between the warring factions with so much foreign involvement. Libya is currently exempted from OPEC+ production cuts. But the exemption ceases once it exceeds 1 million barrels a day (mbd).
With vaccine optimism and OPEC+ almost expected agreement to extend its current production cuts of 7.7 mbd for three more months from January 2021 until the end of the first quarter, oil prices will most probably surge further next year. That is why Brent prices could be expected to average $70 in 2021.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London