What does 2021 hold for Crude Oil?


  • Crude oil has surged to nearly US$45-a-barrel level and continues to grow on the anticipation of demand recovery.
  • EIA expects the oil supply to surge to 97.42 mbpd in 2021 while the demand is set to grow to 98.16 mbpd.
  • A mix of factors like Joe Biden’s presidency, recovery from COVID-19, and vaccination drives would decide the direction of the crude oil.

The crude oil volatility has waned in recent months, and further price recovery lingers on the pandemic containment measures and the vaccination drives across the globe.

During the wild swings in April 2020, the prices for the Western Texas Intermedia (WTI) benchmark crude oil fell to sub-zero levels in the absence of any takers, supply glut, and oil storage crisis. Since then, effective measures by OPEC and OECD including production cut, have been critical to the stability in the crude oil prices today.

Read Here: Crude Surges on Vaccine Optimism and Sharp Build in US Weekly Net imports

       WTI (Left) and Brent (Right) crude oil 1-month Future price Source: Eikon Refinitiv

Pandemic worries and Supply Control remain critical

The combined impact of oil supply by OPEC+ members and low exploration activity in the US and Canada, supports the prices which are anticipated to increase to US$57 per barrel in the December quarter of 2021 (Australia Energy and Resources Quarterly December 2020 version).

Must Read: New COVID-19 Mutation Fears Hit Crude Oil Prices Once Again

 OPEC Crude Oil Production Source: Eikon Refinitiv

The time and rate of increase in prices will depend on the recovery from the pandemic, and the vaccination drives globally. The situation remains grim as the world’s largest economy continues to register over a hundred thousand confirmed cases daily. The new strain of the virus has also led to the imposition of quarantine measures across Europe.

Also Read: Oil prices jump with hope of rising demand

New US President & the Stimulus Expansion

US president-elect Joe Biden will take over the presidency in January and is anticipated to restrict the domestic shale oil production supporting oil prices. Recently, the US House of Representatives voted to raise the pandemic stimulus from US$600 billion to over US$2 trillion.

President Trump, in the penultimate month of his presidency, signed a US$2.3 trillion stimulus package. The unemployment stimulus cheques have now been increased from US$600 to US$2,000 per person. The expanded stimulus package will result in a rapid recovery of the oil demand.

Important Read: Will US End the Shale Boom that Brought Energy Independence?

Data and Projections for 2021

The increase in the crude oil supply from Libya remains a concern for now and is being regularly monitored by OPEC. As decided in the OPEC+ meet held on 3 December, the production increase for January 2021 has been restricted to only 0.5 mbpd against two mbpd. The Energy Information Administration (EIA) forecasts the oil supply to increase to 97.42 mbpd in 2021 while the crude oil consumption will grow to over 98.16 mbpd, registering a growth of around 6.2% against 2020 levels.