The rally in the crude oil market seems to have cooled down with more incoming unfavorable news related to the epidemic. These could adversely affect global demand for crude.
The Australian state of Victoria, the country's second most populous state, is imposing a week-long lockdown due to fears of the spread of a British mutation of the coronavirus. Moreover, OPEC and the EIA have lowered their fuel demand forecasts for 2021 as restrictions persist and new variants of the virus spread. Today, the price of WTI crude oil fell to $57.50 per barrel, while Brent crude oil continues to hover above the $60 per barrell. Oil prices have risen in a few weeks to levels not seen since January 2020. This has come thanks to OPEC+ production cuts, the progress of massive stimulus plans in the U.S. and the introduction of vaccination programs around the world.
The U.S. Energy Information Administration (EIA) raised its West Texas Intermediate crude oil price forecast in its Short-term Energy Outlook report. EIA set the 2021 WTI crude oil price forecast at $50.21 per barrel, up 1 percent from January, and raised the 2022 forecast by 3.5 percent to $51.56. It also raised its Brent crude price forecast to $53.20 in 2021 and to $55.19 in 2022. The agency expects U.S. oil production to reach 11.02 million barrels per day this year, down 0.8 percent from previous estimates.
OPEC says oil demand will increase by 5.8 million barrels a day in 2021, down 100,000 barrels from a month ago's forecast, according to OPEC's report on Thursday. The argument for lowering the forecast for the first half of 2021 is due to prolonged economic restrictions and the reintroduction of partial lockdowns in several countries, OPEC said in a February report.
OPEC believes the second half of 2021 will be key for the market. The organization's baseline scenario is that the outbreak will be overcome in most parts of the world by then, which will support higher global oil consumption. According to the report,
OPEC expects strong demand for oil in the second half of 2021, driven by growing economies and massive stimulus programs. Economic growth could accelerate more than currently expected if fiscal and monetary stimulus is strong, especially in the US. Growth will also depend on how successful efforts to contain COVID-19 are, OPEC conveyed.
According to unofficial data, OPEC oil production averaged 25.50 million barrels per day in January 2021, up 180,000 from December, with production rising in top producer Saudi Arabia, as well as Venezuela and Iran, which are excluded from OPEC+ cuts.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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