BAKU, Azerbaijan, Dec.15
By Leman Zeynalova – Trend:
The market has repriced its expectations for the supply-demand balance for crude oil over the past three-four weeks since the first positive vaccine news broke from Pfizer-BioNtech, Head of Oil Markets at Rystad Energy Bjornar Tonhaugen told Trend.
Tonhaugen noted that the impact on oil prices has been a shift up in near-term expectations of $5-7 per barrel in the front of the futures curve, and higher futures prices all the way through 2024.
“The market also now expects tight supply-demand fundamentals through the next few years, while as late as back in mid-November, the market expected an oversupply/balanced market as evidenced by the upwards sloping shape of the curve then. There are of course other drivers here than vaccines, such as OPEC+ policy expectations, Iran, US shale etc, but the largest driver here we believe has been a shift in demand expectations due to expectations that vaccines will be made available earlier than previously thought by the market,” said the expert.
“We can easily see the market retracting by a similar amount and moving the curve back into “contango” (upwards sloping shape) as the vaccine optimism has reached quite extended levels where a positive impact already in 1Q will be felt on global oil demand and lifting of lockdowns, we believe,” he added.
The U.S. Energy Information Administration (EIA) expects that Brent prices will average $49/b in 2021, up from an expected average of $43/b in the fourth quarter of 2020.
“Brent crude oil spot prices averaged $43 per barrel in November, up $3/b from the average in October. Brent prices increased in November in part because of news about the viability of multiple COVID-19 vaccines, along with market expectations that the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+) would delay or limit production increases planned for January 2021,” EIA said in its December Short-Term Energy Outlook.
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