The Energy Information Administration forecasts crude oil prices for 2021 and 2022 at an average of $53 dollars per barrel; as demand for oil will be greater than global supply, carrying inventory draws, which will impact on oil prices, the agency informed this Thursday.
As a result of this economic behavior, EIA expects Brent crude oil to increase from its December 2020 average of $50 per barrel, to $56 dollars per barrel, especially during the first quarter of 2021.
By next year, crude oil from the U.K may go down to an average of $51 or $54 per barrel, on a quarterly basis.
As we have reported previously, after the covid-19 pandemic, as a measure of containment, economies around the world mandated lockdown periods, striking global demand for oil. In April 2020 crude oil prices went down, and the West Texas Intermediate broke the floor of $0 dollars per barrel of value, reaching a price lower than the -$30 dollars per barrel.
Such demand destruction had a huge impact on the industry; nevertheless, since then, oil prices have struggled to recover and they have surpassed the $50 dollar per barrel value. One of the strategies taken to recover oil prices was a production cut agreement by the Organization of Petroleum Exporting Countries (OPEC) and allies (OPEC+).
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Crude oil production from OPEC and the U.S
Just recently, Saudi Arabia announced a voluntary cut of 1 million barrels during February and March 2021, to maintain market balance and not over supply. Even with this cut, the EIA expects OPEC to produce more oil than in 2020. The forecast is around the 27,2 million barrels per day in 2021, in contrast with the 25,6 million produced in 2020.
For the U.S., the agency foresees a production decline in the first quarter of 2021, with an average of 11,1 million barrels per day. For 2022 average production may increase, as the pandemic is expected to ease, and economy to rise.
For the most part of 2021’s first quarter, demand for oil will be low, as the coronavirus disease keeps spreading among countries; despite, and based upon macroeconomic forecasts by Oxford Economics, EIA expects global gross domestic product to increase by 5,4% in 2021, and by 4,4% in 2022, leading to energy consumption growth.
Lower supply and slowly increasing demand will impact on inventories; inventory draws are also expected to be a factor for rising oil prices during the first quarter of this year. “Despite rising forecast crude oil prices in early 2021, EIA expects upward price pressure will be limited through the forecast period because of high global oil inventory, surplus crude oil production capacity, and stock draws decreasing after the first quarter of 2021,” EIA’s report concludes.
