The surge in COVID cases globally could slow oil demand recovery, which will not leave much upside for oil prices for the rest of 2021, analysts told the monthly Reuters poll, revising down their forecast for this year for the first time since November.
Brent Crude prices are set to average $68.02 per barrel throughout this year, 43 analysts and economists who took part in the Reuters poll said. This compares with a forecast of $68.76 a barrel in the survey in July.
The U.S. benchmark, WTI Crude, is expected to average $65.63 this year, down from a forecast of $66.13 last month.
The key reason for the first downward revision to 2021 prices in ten months of Reuters polls is the surging Delta variant in many major economies, which threatens the path of the oil demand recovery globally.
The International Energy Agency (IEA) warned earlier this month that mobility restrictions to fight the Delta variant were set to slow global oil demand growth in the second half of 2021, although it left its full-year demand growth estimates largely unchanged.
“Growth for the second half of 2021 has been downgraded more sharply, as new Covid-19 restrictions imposed in several major oil consuming countries, particularly in Asia, look set to reduce mobility and oil use,” the IEA said in its closely-watched Oil Market Report for August.
“With the Delta variant in play weighing on demand and price sentiment, overheating in oil prices is unlikely in the near term,” DBS Bank analyst Suvro Sarkar told Reuters in the poll.
The OPEC+ group is set to meet on Wednesday to discuss the situation on the oil market and the progress with the easing of the cuts by 400,000 barrels per day (bpd) each month.
Despite the COVID surge, OPEC+ is likely to continue with the 400,000-bpd production rise, three sources at the group told Reuters on Tuesday.
Early on Tuesday, WTI Crude was down 1.29% at $68.38, and the Brent Crude price was down by 0.94% at $72.78.
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By Tsvetana Paraskova for Oilprice.com
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My reasoning is based on the fact that the fundamentals of the global oil markets are robust underpinned by a global economy rising this year at 6.3% and China’s economy also rising at 8.3%.
The parallels are there for everybody to see. In May 2020 even at the height of the pandemic, China managed to control the pandemic with draconian measures and exited the lockdown thus leading both the global economy and global oil demand out of the doldrums. This has happened again in August 2021 when China has managed again to control the new COVID cases and reported zero new cases.
Therefore, I don’t agree with the Reuters poll of 43 analysts and economists that crude oil prices will not have much upside for the rest of 2021. On the contrary, I see Brent crude touching $80 a barrel before the end of the year and averaging $71-$72 in 2021 with global oil demand hitting 99-100 million barrels a day (mbd).
OPEC+ will probably agree in its meeting on 1 September 2021 to maintain its production cuts at current levels as agreed last month in view of the remaining concerns of a surge in COVID cases in Asia.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London