The International Monetary Fund (IMF) has projected that oil prices will average above $50 per barrel in 2021, a more than 21% rise from 2020’s depressed level me, on the back of the rollout of vaccines and fiscal stimulus programmes.
The IMF now expects global Gross Domestic Product (GDP) to grow 5.5% in 2021, after a 3.5% contraction in 2020, with the 2020 figure revised up 0.9 percentage point from the previous forecast issued in October while the 2021 estimate is a 0.3 percentage point upward revision.
S&P Global Platts quoted the IMF as forecasting that advanced economies are projected to recover more quickly than developing countries due to quicker access to vaccines and broader fiscal measures.
“Oil exporters and tourism-based economies face particularly difficult prospects given the subdued outlook for oil prices and expected slow normalisation of cross-border travel,” it said.
The IMF uses a simple average of prices of Brent, Dubai and WTI to calculate its oil prices. With that methodology, the IMF said oil prices averaged $41.29/b in 2020 and would rise to $50.03/b in 2021, before falling back to $48.82/b in 2022.
The October forecast had estimated that oil prices would average $46.70/b in 2021.
“Non-oil commodity prices are also expected to increase with those of metals, in particular, projected to accelerate strongly in 2021,” the IMF said.
The fund said its forecasts were subject to uncertainty, with the pandemic yet to be contained.
Meanwhile, Barclays has lifted its view on the average Brent Crude price for this year by $2 per barrel, expecting it at $55.
The bank also expects WTI Crude, to average $52 per barrel in 2021, raising its outlook by $2 a barrel due to a weaker U.S. dollar and expected higher demand for winter fuels because of the cold snap in the northern hemisphere.
The new forecasts are roughly the levels at which both benchmarks traded early on Monday, with WTI Crude at just above $52, and Brent Crude at $55.80.
The bank projected a more bullish oil prices in the second half of this year, while for the first half, it still sees downside risks such as expanding Chinese lockdowns to fight resurging Covid cases.
“The Covid-19 shock, despite its acute effects on mobility demand, does not appear, at least for now, to have materially affected the oil supply-demand continuum,” Barclays said.
Transportation demand for oil is set to normalise by the end of this year, thanks to vaccinations and freight demand with fiscal stimuli around the world, according to the bank.
The Organisation of Petroleum Exporting Countries (OPEC) and its allies OPEC+ group is forecasted to ease the cuts by 1.5 million barrels per day (bpd) in total during the second quarter of the year while the alliance is also expected to release another 1.5 million bpd of oil on the market in the second half of 2021, Barclays said