Easwaran Kanason

Co - founder of NrgEdge
Last Updated: December 31, 2020
1 view
Business Trends

Brent, the global crude oil benchmark will end the year 2020 at about US$50/b. Compared to its price level at the start of the year, that’s a fall of some 17%. But absolutes like that do not tell the story of the extraordinary year that was 2020. In between January and December, an oil price war was started, crude oil prices plunged as the coronavirus pandemic swept across the globe. The WTI benchmark briefly fell into negative pricing and the OPEC+ club agreed to a historic supply agreement that slashed nearly 10 million barrels per day of supply from the global market. All of that led to a gradual recovery in crude oil prices, with Brent doubling from its nadir of US$24/b in mid-April 2020. The question now is: what happens in 2021?

There are a lot of assumptions that need to underpin any prediction of crude price trends. And, therefore, it is best to address those before making any pronouncements.

First, demand. With Covid-19 vaccinations programmes rolling out, it is very likely that the global GDP will return to some semblance of normality by mid-2021. Planes and trains will somewhat start flying regularly again, while the travel and hospitality sector will return. In some parts of the world, this has already started to happen. In China, where the pandemic originated, the domestic economy has been pretty much restored and oil demand is now exceeding pre-Covid levels. Other Asian economies are following suit, as the pandemic comes under control. At some point in 2021, the full opening of international borders will follow suit. But there is a new wrinkle in the story. Two new variants of Covid-19 have been discovered recently in the UK, with both thought to be nearly twice as infectious. Travel originating from the UK was blocked as governments panicked over importing the new variants, even as inoculations were rolled out worldwide. So any progress in restoring the global economy and oil consumption trends, could be derailed by ongoing mutations in the virus, especially if any newer variants prove to be resistant to the current vaccines that have been developed.

But, on balance, 2021 should be a year of regrowth, with oil consumption following suit. Depending on the intensity of recovery, world oil demand could rise by between 5-7 mmb/d. That won’t be enough to offset the 9 mmb/d decline in 2020, but will do enough to drive crude oil prices higher. Assuming that the supply situation does not break down.

Alas, that is a possibility. The year 2020 proved to be a year of identity crisis for OPEC+, the producer club that controls over 50% of global crude oil production. After several years of beneficial cooperation that allowed crude prices to recover to US$60/b levels, a spat between OPEC+’s two giants – Saudi Arabia and Russia – triggered a price war to devastating consequences. Bruised egos aside, the immediate aftermath did not prevent the two countries coming together to announce the largest crude oil supply quota deal ever in April. But the scars still remain, driving a wedge between the Saudis and the Russians despite their mutual dependency. Grouses over the quota allocations have also made fresh wounds: culprits like Nigeria and Iraq continue to be blamed for flouting their targets, as was the UAE, formerly a loyal supporter in OPEC’s Saudi faction, which has publicly threatened to leave the group.

All of this has implications for the crude oil supply trend in 2021. In November, it was presumed that OPEC+ would postpone the taper of its supply deal by several months, citing ‘fragility’ of demand. The opposite happened. At a fraught bi-annual meeting, OPEC+ will now switch to a monthly review of quota revisions, allowing for a 500,000 b/d increase in overall production in January and (presumably) increases of the same amount for February and March. But as much as OPEC+ can do, there are factors beyond its control. Libya, an OPEC member does not have any formal quotas, an exception granted as it recovers from a prolonged civil war with production now returning to full strength. US shale is also starting to recover in selected areas. The refining industry, especially in Europe may have remade the balance of fuel supply and demand in ways that are difficult to predict right now.

The picture emerging for 2021 in the short term, is for a demand-led recovery for crude prices, with the main challenge being for supply to throttle its own recovery to keep pace but not exceed the demand curve. If OPEC+ can hold together to continue to play this role, then crude oil benchmarks should stay within the US$50-60/b range in 2021. That won’t be enough to appease everyone, but it should be good enough to keep the industry chugging along and restart some upstream investments. It could be argued that this 2021 prediction may be too optimistic; but we need to move forward from all of the pessimism in 2020 at some point. At least that’s the plan.

Market Outlook:

  • Crude price trading range: Brent – US$49-51/b, WTI – US$47-49/b
  • Global crude oil benchmarks remain rangebound at elevated levels, as the market enters the year-end lull and traders watch for signs of demand recovery and coronavirus developments in key markets
  • Russia has signalled that it will support a further increase in OPEC+ production at the group’s next meeting, making it likely that output will be raised by another 500,000 b/d from February 2021 onwards

Read more:
opec saudi russia opec+ oil price shale usa
2 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

Funko Action Figures: Collectible Figurines

Funko Action Figuresare a popular collectible toy that is now being incorporated into the workplace to motivate employees. The action figures have been used as an alternative to the traditional desk calendar or as a prize for top performers. With this type of incentive, employers can expect their employees to feel more motivated and productive.

Many employers have found that Funko Action Figures are a great way to motivate their employees and provide incentives for high performance at work. Funko Action Figures are a popular collectible toy that is now incorporated into the workplace. These small collectibles are given to employees to motivate them. Funko figures were once only available at comic book stores, but now they are being used in offices for this purpose.

The company is called Zappos and they first introduced this idea back in 2009. They gave these figurines to their employees as a way of motivating and rewarding them for their hard work and dedication. Although it’s not very clear why the action figures themselves motivate people, we can see that it has been working well for Zappos as they have continued to use it since 2009. These soft-bodied vinyl figures, often called "Pop!" Figures were originally conceived by Mike Becker and founded by Alan Becker.

The Funko Pop! Action Figure is a line of collectible toys produced by the company Funko LLC. They are typically stylized vinyl figures depicting characters from various media and entertainment. First introduced to the public in 2005, the company was originally founded as a bobblehead company in 1998 and became popular through distribution at chain retailers such as Walmart and Target. The first wave of Funko Pops was based on Disney properties like Mickey Mouse as well as other popular culture icons such as Conan O’Brien and Catwoman.

Funko Action Figures are collectible figurines that often depict pop culture characters. They are often used in the office to motivate employees and provide a sense of community. Funko has established itself as a major player in the toy industry with its trademarked Pop! vinyl figures. This company is taking on new ventures like collecting by introducing Funko Action Figures, for example, Boba Fett from the Star Wars movies. This type of product is sometimes called a 'blind box' because you don't know which figure you're getting until you open it. The Boston-based company, BuzzFeed, has introduced this type of toy into their office to help with team building and morale. The employees at this company seem to have a lot of fun with them.

May, 25 2022
Asset Works - Fleet Management Software

Asset Works FleetFocus fleet management software is a powerful solution designed to help asset- and infrastructure-intensive organizations control costs and streamline operations. By tracking vehicle location and maintenance history, fleet managers can extend the useful life of their fleet and prevent costly downtime. With preventive maintenance scheduling, work order and labor tracking, and parts and inventory tracking, FleetFocus helps fleet managers maximize efficiency while minimizing expenses. As a result, Asset Works fleet management solutions deliver industry-leading value for fleet managers around the world.

Support: [email protected]

May, 24 2022
Where to buy your Gun Parts from?

It is important to know where to gun parts from. There are many places you can buy them from, but it is important to choose the right place so that you get the best quality and service. There are many places where you can buy gun parts from. You can buy them from gun stores, online retailers, and even at a flea market.

One of the best places to buy gun parts from is Always Armed.They have a wide range of products available, they offer great customer service, and they have convenient shipping options.

Buying gun parts can be a difficult task. There are many different types of firearms and there is a huge variety of gun parts. The right place to buy gun parts depends on what you are looking for and what kind of firearm you have.

If you are looking for a specific part, then your best bet is to search online. You can find the part that you need at an affordable price and it will be delivered right to your door. If you want to save time, then this is the best option for you. If not, then your local gun store might be the best option for you because they have many different types of firearms as well as all kinds of other equipment that might come in handy for hunting or shooting sports.

When it comes to buying gun parts, you need to be very careful. There are a lot of scams out there and some companies just want to take your money and never send you the goods. 

May, 20 2022