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By Trend

Average petroleum spot prices per barrel are projected at $41 in 2020 and $43.8 in 2021, higher than in the April and June forecasts, Trend reports citing the International Monetary Fund (IMF).

Oil futures curves indicate that prices are expected to rise thereafter toward $48, some 25 percent below the 2019 average, IMF said in its October World Economic Outlook.

“Oil prices declined by 60 percent between February and April 2020 as the pandemic led to a collapse in global oil demand and concerns about storage capacity. In March OPEC+ (Organization of the Petroleum Exporting Countries, including Russia and other non-OPEC oil exporters) could not agree on supply cuts to restore order to the market, but as the oil price fall intensified, in mid-April the cartel decided to curb production by 9.7 million barrels a day in May and June (later extended until July) by 7.7 million barrels a day until December 2020 and by 5.8 million barrels a day until April 2022.

“US crude oil producers were also hurt as the front-month futures price for the West Texas Intermediate blend briefly went to –$37 in April. Protracted low oil prices led to shut-ins, sharply reduced drilling activity, and a surge in US shale producer bankruptcy filings. This resulted in an unprecedented 2 million barrel a day decrease in US crude oil production in May 2020. Thanks to supply reductions, from late April onward, oil prices recovered from the mid-$10s to more than $40 a barrel by early June, but into August they remained about $25 below early January prices. As a result, many oil firms have suffered large losses, massive layoffs, and asset write-downs as they reassess price outlooks and investments.

“On the demand side, the COVID-19 outbreak drove oil prices sharply down as travel restrictions strongly reduced global demand for liquid fuels in the first half of 2020. On one hand, road traffic has recovered in many countries; on the other hand, air traffic volume—especially international flights—remains subdued. As a result, the International Energy Agency expects oil demand for this year to be down by 8.1 million barrels a day, to 91.9 million barrels a day, and to rebound by 5.2 million barrels a day in 2021—a significant revision up from –9.3 million barrels a day for 2020 in its April forecast,” reads the report.

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