Assuming a second coronavirus-induced lockdown is averted, global crude oil prices will continue their slow grind higher, reaching $50 per barrel by year's end and closing in on pre-pandemic levels near $60/bbl by the end of 2021, according to recent forecasts from analysts.
Oil prices will advance in 2021 and trend toward a level between $55/bbl and $60/bbl by the end of 2021, Evercore ISI analyst Doug Terreson said during an Aug. 19 webinar.
West Texas Intermediate, or WTI, crude futures prices on the New York Mercantile Exchange have surged more than $80 since the May contract settled at a historic low of negative $37.63/bbl on April 20, roaring back to near $40/bbl in a matter of weeks as U.S. producers quickly shut in output.
As of Aug. 18, front-month WTI futures settled at $42.89/bbl, while Brent crude oil ended at $45.46/bbl. The differential between the two should continue to narrow, the Evercore analysts said.
WTI and Brent crude futures generally run close to the same levels, but the spread between them blew out dramatically in April when WTI turned negative for the first time ever, highlighting the fear that storage at Cushing, Okla., the delivery point for NYMEX WTI futures, was nearing capacity.
Global oil demand is expected to be very weak for 2020, with estimates calling for a decline of between 8 million bbl/d and 9 million bbl/d, Terreson said. However, as demand rebounds amid a recovery in the economy, consumption could return to 2019 levels by 2022.
Year-to-date, non-OPEC oil supply is anticipated to have declined by 5 million bbl/d amid reductions by the U.S. and other producers.
Global crude oil inventories should continue to be drawn down through 2021 as OPEC+ countries comply with output cuts.
Under an accord reached in June, OPEC and its allies agreed to curb production by 7.7 million bbl/d from August through the end of 2020 and by 5.8 million bbl/d from January 2021 through April 2022.