Oil price rebounds; will hit $60 per barrel in 2021

Oil price rebounds; will hit $60 per barrel in 2021

MOSCOW – The price of Brent crude, which fell to USD47 per barrel ahead of the OPEC+ meeting, rose to almost USD50 per barrel, rebounding on positive news about the decision reached by the participants to the oil production cut agreement.

Now, this is the maximum price and it is unlikely to rise in the near future, according to experts interviewed by TASS.

However, in 2021, with the beginning of mass vaccination and the passage of the peak of oil production in the United States, oil prices may rise to USD60 per barrel, they note.

Growing on positive news

The decision of the OPEC+ countries to mildly increase oil production from January was greeted with optimism on the market.

The price of Brent, which was declining before the meeting on alarming news about disagreements within the alliance, grew by almost USD2 and exceeded USD49 per barrel after the consensus was announced.

Finam analyst Alexei Kalachev said for the moment, there are no reasons to expect oil prices to grow above USD50.

“Most likely, the price will stay in the current range — USD45-50 per barrel,” he says.

“Judging by the reaction, the market was waiting for the worst decision. But I admit that it could be (the) closing of short positions,” Andrey Polishchuk, an analyst at Raiffeisenbank, said.

The average oil price in the first quarter of 2021 will be USD45 per barrel, the bank predicts.

The rise in oil prices was not only due to the decision of OPEC+, says Vasily Tanurkov, director of the corporate ratings group at ACRA (Analytical Credit Rating Agency).

“Stock markets are growing awaiting a vaccine. The oil market remains in short supply, stocks are slowly decreasing. In addition, there is another aggravation around Iran. The OPEC + decision removed some risks of uncertainty, and this, among other things, let oil prices grow,” he said.

Sooner or later, prices will surpass the USD50 mark per barrel, analysts say. This may happen if the growth of oil consumption in Asia continues. Further dynamics will also depend on how Europe and the United States deal with the second wave of coronavirus disease 2019 (Covid-19), which has yet to be taken under control, said Ole Hansen, head of commodity strategy at Saxo Bank.

By the end of 2021, oil price may rise to USD60 per barrel, said Polishchuk from Raiffeisenbank.

“The range of USD55-60 per barrel can be considered equilibrium, it is possible when oil reserves on the market return to normal volume and it will be possible to restore production in OPEC+ at a faster pace,” Tanurkov said.

Not only the start of mass vaccination but also the market’s awareness that the peak of shale production in the United States may have already passed can contribute to the oil price rise, the expert said.

“If the price of oil is below USD60 per barrel for a very long time, then it is quite possible that the historical peak for shale production has already come, and production in the United States will no longer grow to the past highs,” Tanurkov said.

“Of course, one cannot assert it with full confidence. But, judging by the reports of American companies, they have already pumped out all the cheap oil. However, if oil prices rise again to USD100 per barrel, then no one can rule out a new round of the shale revolution,” he added. (PNA)

Leave a Reply