By Adedapo Adesanya
Expectations for global crude oil prices in 2021 swing between hope for effective vaccines against COVID-19 and concerns over uncertain oil demand with a second wave of rising infections around the world.
Last year, Brent crude, the international benchmark crude, dropped as low as $16 per barrel while the United States’ West Texas Intermediate (WTI) crude in April plunged below zero for the first time in history, due to coronavirus-related lockdowns and relevant declining oil demand.
The price dispute between the world’s second-largest oil producer Saudi Arabia, a leading member of the Organisation of the Petroleum Exporting Countries (OPEC), and non-OPEC producing countries led by Russia, greatly contributed to the oil price collapse in March – April 2020
But oil demand gradually rebounded and so did oil prices in the second half of 2020 as the global crude market rationalised supply while business activities resumed in many economies amid preventive measures against the virus.
On the last day of 2020, Brent crude closed at $51.80 dollars while WTI closed at $48.52 per barrel.
In 2021, Brent prices are set to average $50.67 a barrel while the US benchmark is expected to average $47.45 a barrel. Despite expectations about oil demand, recovery is anticipated to remain lower than it was before the pandemic.
It is widely believed that vaccination against the virus will revive optimism about global economic recovery as well as oil demand and prices. If the vaccines are soon widely available and effective, demand is expected to start rising in the second quarter of 2021.
However with the current second wave of COVID-19, with its soaring infections across the world, this is likely to cap oil price gains in the early months of the year and further bring uncertainty about oil demand throughout the New Year.
On the vaccine front, the World Health Organization (WHO) recently granted emergency validation to the Pfizer-BioNTech vaccine, which was also authorised by the European Union.
Britain authorised the Oxford-AstraZeneca vaccine for emergency use, and China approved its Sinopharm vaccine that was also approved in the United Arab Emirates, Bahrain and recently Egypt. Dozens of other vaccines are currently being tested on humans and animals.
In light of the hopeful indications, OPEC and OPEC+ countries decided in a ministerial meeting in early December to increase production by 500,000 barrels a day as of January.
The group’s meeting will be held every month in 2021 to assess market conditions and needs and decide an adjustable monthly production accordingly. The first of the year will hold today via videoconference.
Despite renewed fears about oil demand due to the new coronavirus strain, Russia is reportedly still in favour of another 500,000 barrels per day increase in the alliance’s oil production from February.
OPEC yesterday noted that crude demand is expected to rise by 5.9 million barrels per day to 95.9 million barrels per day this year. The group also sees plenty of downside demand risks in the first half of 2021.
Currently, oil prices are trading up with Brent trading at $52.56 per barrel while WTI is near $49 per barrel.
