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James Hyerczyk
WTI and Brent Crude Oil

Reuters recently took a poll of major oil analysts and the results revealed that oil prices are unlikely to mount much of a recovery in 2021 as a new coronavirus variant and related travel restrictions threaten already weakened fuel demand.

The poll of 39 economists and analysts conducted in the second half of December forecast Brent crude prices would average $50.67 per barrel next year.

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That is up from a poll last month that forecast a 2021 average price of $49.35 per barrel but little changed from Brent trading at around $51 on Thursday.

West Texas Intermediate (WTI) U.S. crude futures are expected to average $47.45 per barrel in 2021, the poll showed.

That too is up from a November consensus of $46.40 per barrel but little changed from Thursday WTI trading near $48.

Concerns Over New Variant of Coronavirus and Renewed Restrictions

A new variant of the coronavirus detected in Britain this month raises the risk of renewed restrictions and stay-at-home orders, which along with a phased rollout of vaccines might restrict further price gains.

Oil demand recovery will depend on the pace of deployment of the vaccines being developed to combat the virus, analysts said, with some expecting no return to pre-pandemic levels before late 2022 or 2023.

A major concern for traders that could cloud any bullish outlook will be the discovery of new virus stains. They could lead to harsher lockdowns that will likely cripple the global demand outlook for the first quarter.

During the first half of the year, the major factors likely to influence crude oil prices the most will be the prospect of additional restrictions and lockdown measures and the output decisions by OPEC+.


OPEC+ Summit on Tap

OPEC producers and allies including Russia, the so-called OPEC+, have agreed to loosen their output cuts by 500,000 barrels per day from January. OPEC+ is scheduled to meet on January 4 to discuss policy, including a possible additional loosening of 500,000 bpd in February.

That’s a lot of oil to hit the market especially when the U.S. producers are opening up wells. One bad move by OPEC+ combined with weak demand could trigger a major setback in prices.

For a look at all of today’s economic events, check out our economic calendar.
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