ICE Brent crude oil front-month prices averaged $55.2 per barrel (p/b) in January 2021 and increased by 9.7% from $50.3 p/b in December 2020. Oil prices have been recovering from the coronavirus-led drop in 2020, as they nearly reached their level of $55.5 p/b in February 2020, right before the World Health Organization declared the coronavirus to be a global pandemic, and prices fell to an average of $33.7 p/b in March 2020. Also, prices reached $58.5 p/b on February 3, 2021, their highest level since February 2020. Oil prices have been supported by Saudi Arabia's oil production cut, a high compliance level with the output reduction of the OPEC and non-OPEC alliance, and by prospects that a coronavirus vaccine as well as stimulus packages in several countries would boost the recovery in global oil demand. In parallel, Goldman Sachs expected the increase in global oil demand to continue to rebalance the oil market, given that the logistical challenges of vaccination appear to be temporary and the vaccine seems to have a high level of efficacy. As such, it anticipated an average deficit of 0.9 million barrels per day in the global oil market in the first half of 2021. It pointed out that the relatively low drilling activity at current price levels reduces the risk of higher output from oil producers outside the OPEC and non-OPEC alliance, which will help offset the potential slowdown in demand recovery in case the vaccine fails to contain the outbreak. It forecast Brent oil prices to reach $65 p/b by July 2021, and added that the growing evidence of under-investment in the sector raises the upside potential for prices in 2022.
Source: Goldman Sachs, Refinitiv, Byblos Research