Crude oil prices are inching up smartly with prices of Brent crude oil futures nearing the 11-month high of USD 60.0 a barrel.
Image Source: © kalkine Group 2020
Trend shifts as consumption picks steam
The shift in the global demand and supply pattern is now weighing the balance in favour of the oil bulls. Since the second half of 2020, rising oil consumption and reduced crude oil production from OPEC+ and the United States have set a medium-term trend for oil, which has seen the prices shoot up ~57 per cent from USD 36.40 per barrel (low in April 2020) to USD 57.38 per barrel (as on 13 January 2020 3:06 PM).
Image Source: Megapixl
In its path to recovery, oil prices have responded to different macro factors, but the overall trend of consumption surpassing supply seems to be blowing the wind in favour of oil prices.
Production and Consumption Forecasts
Furthermore, many industry experts anticipate that this current trend would remain in place for a while with increasing consumption and a slightly lower production anticipated in 2021 and 2022, thanks to the fall in production across OPEC+ and the United States.
- The United States Energy Information estimates that the global petroleum and other liquid fuels consumption would increase by 5.6 million barrels per day in 2021 while increasing by 3.3 million barrels per day in 2020.
- The surge in the global consumption is projected to increase primarily due to a uptick in global GDP as well as a move toward pre-pandemic patterns of travel, particularly in late 2021 and in 2022.
- EIA anticipates that the global GDP would increase by 5.4 per cent in 2021 and by 4.3 per cent in 2022, giving a boost to the global petroleum and other liquid fuel demand.
Additionally, while the demand is anticipated to increase at a slightly higher rate as compared to the global production, the oil production across both OPEC and non-OPEC members is expected to increase.
OPEC and Non-OPEC Production
EIA anticipates the production across OPEC would average 27.2 million barrels per day in 2021, up by ~ 7.42 per cent as compared to the previous year average of 25.6 million barrels per day.
The surge in OPEC production is mainly estimated to be in line with the recently announced increase in production target by OPEC along with a gradual increase in production across Libya.
On the non-OPEC counter, EIA forecasts the production to increase by 1.2 million barrels in 2021 against the previous year with a gradual increase in prices supporting the production.
Brent Crude Oil Price Projection
Image Source: Megapixl
A slightly higher consumption as compared to the global production across major oil producers would eventually propel the price, and EIA estimates Brent crude oil spot to average USD 53 a barrel in both 2021 and 2020, up by ~ 26.19 per cent as compared to the average price of USD 42 a barrel seen in 2020.