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Oil prices to be higher than projected levels in 2020

Oil&Gas Materials 23 October 2020 09:49 (UTC +04:00)
Oil prices to be higher than projected levels in 2020

BAKU, Azerbaijan, Oct.23

By Leman Zeynalova – Trend:

Oil prices are expected to average $44/bbl in 2021, a slight increase from a projected $41/bbl in 2020 but still significantly lower than their 2019 level of $61/bbl, Trend reports with reference to the World Bank (WB).

The forecast is slightly above the April projections, primarily reflecting a somewhat improved global growth outlook, as well as a stronger-than-expected supply response, the WB report says.

“Crude oil prices were nearly 40 percent higher, on average, in 2020Q3 (q/q), although they remain around 30 percent below their pre-pandemic levels. After plunging in March and April, crude oil prices saw a robust recovery in May and June. The recovery in prices was driven by a sharp reduction in production, especially by OPEC+, as well as a modest recovery in consumption as lockdown measures were eased and travel and transport began to pick up. Prices have been broadly flat since then, averaging $42/bbl in 2020Q3, only slightly above their level in June. Prices fell a little in September and into October as worries about a second wave of the pandemic in the Northern Hemisphere intensified.

“Global oil production plummeted by 12 percent in May, falling from 100mb/d to 88mb/d, and has only gradually increased since. Production is now lower than consumption, which has led to a drop in inventories, although they remain at very high levels. The fall was driven by large production cuts by OPEC and their non-OPEC partners (OPEC+), who collectively agreed to production cuts of 9.7mb/d—a reduction of more than one-fifth of their “baseline” levels—before gradually tapering production cuts over the next two years. Compliance with the cuts so far has been high, particularly compared with previous agreements, with only a couple of countries producing significantly in excess of their quota. The group increased production by 2mb/d in August, in line with their agreed schedules, with the next planned increase in January 2021. However, if the recovery in demand stalls, it is possible that this could be delayed,” reads the report.

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