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Crude oil price rally has stalled post surpassing the 9-month high with the Brent crude oil futures reaching a high of USD 51.90 per barrel (intraday high on 17 December 2020). The market seems to have backed in the positive news on COVID-19 vaccine.
The commodity has established a strong base around USD 50 a barrel, and the market now seems to be again focusing on the demand and supply scenario with crude oil entering a low volatility zone.
To Know More, Do Read: Crude Surges on Vaccine Optimism and Sharp Build in U.S. Weekly Net imports
Image Source: © Kalkine Group 2020
While the oil market has seen a major recovery over the vaccine optimism and sudden decline in the United States commercial crude oil inventory, the demand and supply scenario once again seems to be netting off each other.
Brent Crude Average Price to Increase as Demand Gradually Increases
The Brent crude oil spot averaged USD 43 per barrel during November 2020, up by 7.5 per cent a barrel as compared to the previous month’s average price of USD 40 a barrel. However, after a strong month of price recovery, the oil market is anticipated by many industry experts to remain sluggish over the short-term.
However, over medium- to long-term, the oil market participants are focused on the recovery in demand amidst building global inventory.
Image Source: Megapixl
The United States EIA projects the Brent crude oil spot prices to average at USD 49 a barrel in 2021, up from an expected average of just USD 43 a barrel. EIA believes that a gradual recovery in demand would support the price ahead amidst high global oil inventories.
Furthermore, the EIA anticipates the average price to eventually increase quarter-on-quarter in 2021 with prices averaging USD 47 per barrel during the 1Q of the year 2021 while eventually averaging USD 50 a barrel by the fourth quarter of the year 2021.
Revision Demonstrates Optimism
Image Source: © Kalkine Group 2020
In the recent past, the EIA revised and upgraded its average price forecast, increasing the 2021 first-quarter estimates by USD 5 per barrel while inching up the fourth-quarter estimates by a unit per barrel.
The major revision for the first-quarter estimates was majorly due to the steeper expected global oil inventory draws over OPEC+ decision in December 2020 to limit its previously planned production increases in January 2021.
On the production counter, the global oil demand is anticipated by industry experts to average ~27.5 million barrels per day in 2021, slightly up against the previous estimate of ~ 25.6 million barrels per day over potential increases by OPEC and some production increase from Libya.
In a nutshell, after showing a steep recovery in prices, the Brent crude oil has hit the crossroads with price range narrowing down over lack of major triggers and a balanced demand and supply counter.
However, over the medium- to long-term, the market seems to expect the Brent oil to average higher over a gradual increase in demand amidst building global inventory.
