Oil prices are unlikely to jump too much this year despite the OPEC+ production cuts as the economic and oil demand recovery are set to pick up steam only in the fourth quarter, a monthly Reuters poll of analysts showed on Tuesday.
Still, the 45 economists and analysts in the survey raised their oil price forecasts from last month’s projections, expecting a relatively modest recovery in demand in Q3 and a stronger rebound toward the end of the year and in 2021. The experts see WTI Crude averaging $36.10 per barrel in 2020, up from the previous projection of $32.78 a barrel.
Brent Crude is expected to average $40.41 per barrel this year compared to last month’s forecast of $37.58 a barrel.
Early on Tuesday at 8:10 a.m. EDT, Brent Crude was down 1.7 percent at $41.03, and WTI Crude traded down 1.69 percent at $39.07, dragged down by demand concerns with spiking COVID-19 infections and supply concerns over a possible imminent return of Libya’s oil production, which has been stifled since January due to port blockades.
According to the analysts in the Reuters poll, a second wave of coronavirus cases could dampen the global economic and oil demand recovery if countries and U.S. states backtrack some of the eased measures.
Texas and Florida have reversed some of the re-opening of their economies, while the city of Leicester in the UK is now back under full lockdown in the first local lockdown since England lifted the nationwide lockdown a few weeks ago.
“We still believe it is difficult to justify significant upside in prices in the near term due to the high levels of inventory, continued weakness in refinery margins, and the fear over a severe second wave of Covid-19. Therefore it looks likely that the market will continue to consolidate around current levels,” ING strategists Warren Patterson and Wenyu Yao said on Tuesday.
“The medium and long term outlook for prices remains more constructive, with deficits expected to persist through 2021, assuming that OPEC+ stick to their production cut deal,” according to ING.