Outlook for crude oil prices strengthens through 2021 as markets approach key ‘pivot point’ of recovery
Published by Elizabeth Corner,
Senior Editor
World Pipelines,
Oil markets have returned to relatively stable ground with Brent prices within a narrow US$40 – 45/bbl range and could conclusively pass the US$50/bbl mark in the second half of 2021, according to Roger Diwan and the IHS Markit Energy Advisory Service.
The IHS Markit Brent price outlook has been revised upward to an average price of S$42.35/bbl in 2020 and S$49.25/bbl in 2021 – up US$7.09/bbl and US$5.25/bbl, respectively, from the outlook in May.
Emerging bruised and battered from the worst of the COVID-19 outbreak, oil markets are now at a delicate pivot point as they transition to phase II of the IHS Markit Three Phases of Oil Markets Recovery.
“The record cuts set in motion in May and June by Saudi Arabia and its OPEC+ partners played a pivotal role in accelerating the improbable rebalancing of global oil markets. With demand recovering from April lows and after giving markets an extra month to find their footing, these exporters have now moved from managing the immediate surplus of the crisis towards managing the recovery.” – Roger Diwan, Vice President Financial Services, IHS Markit.
Phase II of the recovery (the “just-in-time oil market” phase) is a delicate transition phase in which surplus inventories are worked down in parallel with rising supply as spare supply capacity returns from Vienna Alliance and North American producers.
OPEC+ and the United States are bringing back over 4 million bpd of production in July and August. Meanwhile, the global demand recovery is showing clear signs of plateauing and Chinese crude buying has begun to soften.
Barring a large second wave of COVID-19 cases driving widespread economic shutdowns, IHS Markit expects Brent will stay within a US$40 - 47/bbl price band on average over the next four quarters.
This stabilisation period will make way for the more structural stage of the recovery process, wherein the progressive normalization of demand and OECD commercial stocks allows a return of most spare capacity in Russia and in the key producing countries in the Gulf. This could start as early as the second half of 2021, when Brent prices could conclusively pass the US$50/bbl mark.
“The recent display of restored harmony among OPEC+ heavyweights Saudi Arabia and Russia illustrates that the strategic debate within the group over price levels and market share has time to run.
“As long as prices hold in the current range, demand concerns will likely help keep the agreement on course. When prices surpass $50/bbl, potentially lifting capital spending in the United States higher, that is when changes to the tenor of the discussion, and the divergence of interest could start to play out.” – Roger Diwan.
Read the article online at: https://www.worldpipelines.com/business-news/10082020/outlook-for-crude-oil-prices-strengthens-through-2021-as-markets-approach-key-pivot-point-of-recovery/
You might also like
World Pipelines Podcast: All things Canada, with the PLCAC
Elizabeth Corner speaks to Kevin O’Donnell, Executive Director of the PLCAC, about how membership organisations benefit the pipeline sector and those who work in it, discussing events, networking, resources, training, skills development, and learning.
Altrad completes acquisition of Stork’s UK business
Altrad has confirmed it has completed the purchase of Stork TS Holdings Limited which holds the Stork UK group of companies.