Will the decline in oil prices continue?

This weekly report is an excerpt from our Short-Term Outlook service analysis, which covers a period of eight quarters and provides monthly forecasts for crude oil, natural gas, NGL, refined products, base petrochemicals and biofuels.  Contact John Paisie (+1-832-517-7544 or E-mail) for the detailed analysis or for more information about the Short Term Outlook.


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The price of Brent crude ended the week at $63.05 after closing the previous week at $64.86. The price of WTI ended the week at $59.34 after closing the previous week of $61.45. The drop in prices came after the announcement at the end of previous week of increased production from OPEC+. The price of Brent crude has now declined by 9.45% since reaching $69.63 on March 11 of this year. The decline in the price of WTI during the same time interval has been 10.12%. Additionally, during the same period the oil traders have been reducing their long positions. Since mid-February, traders of WTI have decreased their net long positions by around 12.0%. Similarly, traders of Brent crude reduced their long positions, while increasing their short positions.

So now where will prices go? Will oil prices continue on the downward trend of the last several weeks? Or will oil prices rebound?

We think that oil prices will increase during the second quarter with the price of Brent crude averaging $65.75, and the price of WTI averaging around $62.00. Our expectations are based on the following:

  • The global economy is strengthening with the recovery being led by the US, China, and India
  • Product demand is forecasted to increase in 2Q21 by 1.62 million b/d in comparison with demand of 1Q21
  • Oil demand will continue to outpace oil supply during 2Q21, even with the recently announced increases in OPEC+ supply
  • The outlook for the refining sector will improve with increased crack spreads and higher crude runs, which will provide additional support to crude prices

There are risks associated with our outlook, most notably the following:

  • COVID-related risks still represent the greatest potential for disrupting the oil markets, especially if the current vaccines prove to be ineffective against variants of the virus
  • Inflation reaching levels that would result in the reversal of accommodating policies of the US Federal Reserve, and subsequently, higher interest rates and a stronger US dollar
  • The fragile condition of the less-wealthy economies, which is underpinned by the lack of wherewithal to address COVID-19 in terms of a public health response, as well as fiscal and monetary responses
  • Lagging recovery in Europe, and the inability to put forward a more proactive fiscal and monetary response
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