Brent crude prices are set to average $42.35 a barrel this year and $49.25 per barrel next year, latest IHS Markit’s price forecast released at the weekend has shown.
The report showed that it was raised by $7 a barrel for next year compared to the previous projection in May.
After the worst of the demand crash in April, oil markets are now “at a delicate pivot point as they transition to phase II” of the recovery expected by IHS Markit.
In recent weeks, oil prices have been relatively stable, with Brent crude trading in the narrow $40-$45 per barrel range. The price of Brent “could conclusively pass the $50 per barrel mark in the second half of 2021,” Vice President Financial services at IHS Markit, Roger Diwan, said in a note at the weekend.
Brent crude prices are expected to remain in the $40-$47 per barrel price range on average over the next four quarters, if there isn’t a major second wave of COVID-19 that could prompt widespread economic shutdowns, according to IHS Markit.
The current market fundamentals are not conducive to a jump in oil prices as the non-members of the Organisation of Petroleum Exporting Countries (OPEC+) and North American producers are bringing back a total of around 4 million bpd on the market in July and August, the consultancy says. At the same time, there are signs of stalling oil demand recovery, while China’s record crude buying spree may be coming to an end.
“As long as prices hold in the current range, demand concerns will likely help keep the [OPEC+] agreement on course. When prices surpass $50/bbl, potentially lifting capital spending in the United States higher, that is when changes to the tenor of the discussion, and the divergence of interest could start to play out,” Diwan said.
Oil prices are unlikely to go much higher than current levels if global oil demand recovery doesn’t pick up in a meaningful way in the second half of the year, the monthly Reuters poll of analysts and economists showed last week.
