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Oil prices will likely remain at the current high levels in March and April, with Brent Crude prices averaging between $65 and $70 per barrel, after the OPEC+ group unexpectedly decided to maintain their production cuts into April, the U.S. Energy Information Administration (EIA) said on Wednesday.
In its Short-Term Energy Outlook (STEO) for March, the EIA expects Brent prices to average $65 to $70 per barrel in March and April, more than $10 a barrel above the forecast from February, primarily due to OPEC+ keeping a tight rein on production in April.
Earlier this month, the OPEC+ alliance decided not to raise production from April, except for small increases for Russia and Kazakhstan, while top OPEC producer and de facto leader, Saudi Arabia, is keeping its extra 1 million bpd cut into April. This was contrary to market expectations which had revolved around the group easing the cuts by 500,000 bpd and the Saudis reversing the additional cut.
For the second quarter of 2021, the EIA sees Brent prices averaging $64 per barrel and then averaging $58 a barrel in the second half of 2021, as it expects downward price pressures will emerge in the coming months as the oil market becomes more balanced.
Wood Mackenzie expects oil prices to rise toward $70-$75 per barrel during April, with the stock draw significantly more than 1 million bpd next month, as the summer demand season looms.
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“The risk is these higher prices will dampen the tentative global recovery. But the Saudi Energy Minister, Prince Abdulaziz, is adamant OPEC+ must watch for concrete signs of a demand rise before he moves on production,” Ann-Louise Hittle, vice president, Macro Oils, at Wood Mackenzie, said after the OPEC+ meeting earlier this month.
Following the surprise OPEC+ decision to keep oil production flat in April, Goldman Sachs now sees Brent prices hitting $80 a barrel in the third quarter this year and $75 in the second quarter, up by $5 compared to the previous forecast issued just two weeks prior.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com
Still, oil prices are now definitely in a bull market that could last several years. Other than the economic stimulus packages, oil prices will be underpinned in 2021 and the coming years by a return of the global economy to normal business activities as a result of the global rollout of anti-COVID vaccines, a fast-depleting global oil inventories, almost complete compliance by OPEC+ with the production cuts, the insatiable thirst of China and India for oil, a very significant decline in the global oil industry’s investments and a weak US shale oil industry.
Oil prices will soon resume their surge with Brent crude hitting $70-$80 a barrel in the third quarter of 2021 if not earlier and global oil demand returning to pre-pandemic level of 101 million barrels a day (mbd) by the middle of this year.
We could also see $100 oil in the second half of 2022 or the first quarter of 2023 as a result of a demand-supply deficit estimated at 10-15 mbd during 2022/23.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London