How Will Oil Fare in 2021?
Jan 02 2021
While 2020 marked a strong start for oil, the coronavirus pandemic quickly sent shockwaves through the market. By April prices for WTI oil futures contracts fell below zero for the first time in history, a dramatic tumble that was sparked by global lockdowns. Looking forward to 2021 analysts are predicting a swift recovery, with Goldman Sachs forecasting prices of up to US$65 per barrel for Brent crude.
Global Head of Commodities Research Jeffrey Currie says structural investment in oil and gas will play an important role in lifting prices, saying 2021 will usher in a “long-lasting bull market” for all commodities.
COVID-19 vaccine sparks hope for energy industry
The optimism follows the launch of the highly anticipated COVID-19 vaccine being rolled out in the UK and North America. Alongside the vaccine, the multinational investment bank and financial services company says OPEC+ restrictions will help bolster prices and drive an industry recovery. Currie says the company expects global demand to hit 102.5 million b/d in 2022.
“It's important to separate the vaccine, which is a tactical upside catalyst, from the pandemic itself, which is a structural catalyst to a longer-lasting bull market,” says Currie. “As we look out to 2021 the vaccine creates that V-shaped recovery... but looking beyond that we believe it's the beginning of a structural bull market not only in oil, but across the entire commodity complex.”
Ground transportation and petrochemicals to step up
While the overall sentiment is positive, the New York-based bank says global demand will plummet by 3 million bpd in the wake of new lockdowns in the UK and Europe. The new COVID-19 variant has spread rapidly and sparked fears that hospitals could once again be overwhelmed. As a result, air, road and rail transport has come to a halt and drastically reduced demand for crude.
International air travel usually accounts for a large portion of global oil consumption, though some analysts warn it may not recover to pre-pandemic levels until 2024. Instead, industries such as ground transportation and petrochemicals will step up and aid the recovery. Ironically, Currie also says green energy projects will drive consumption.
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