Although the pandemic will continue to weigh on oil demand in 2021, some estimates show that monthly supply deficits could reach their highest in years.
Rystad Energy expects vaccination campaigns to help bring a rapid recovery going forward. Monthly supply deficits will start from May, reaching a high of around 3.4 million barrels per day in August.
“As deficits continue uninterrupted through the year, August’s high could be repeated, if not exceeded by year-end,” the energy consultancy said.
“Our monitors in the US are starting to point out at stronger activity … In addition, there are winds of change forecasted in the geopolitical realm next year,” said Bjornar Tonhaugen, Head of Oil Markets at Rystad Energy.
Oil prices rally
Meanwhile, crude prices continued to rise as markets shrugged off US President Donald Trump’s threats to derail the stimulus programme.
Brent crude rose 2.7 per cent to $51.15 a barrel, while US crude (WTI) jumped 2.75 per cent to $48.05 a barrel.
“With liquidity falling into the holiday period, I expect oil to trade in some quite broad, and potentially volatile ranges in the days ahead,” said Jeffrey Halley Senior Market Analyst, Asia Pacific, OANDA.
“Oil’s ability to move through resistance depends entirely on developments in Washington DC, which are looking very messy at the moment,” said Halley. “That still leaves the door open equally, for a sharp fall or rally from here, despite the underlying bullish case for higher prices in 2021.”
Going into 2021, the market will largely be balanced in January, with supply and demand hovering between 77.7 and 77.8 million barrels per day (bpd), according to Rystad Energy.
The effect of global lockdowns will be felt even more in February and March as demand will not follow the growing supply, creating a surplus of 0.5 million bpd in February and 1.4 million bpd in March.
A minor surplus will also be recorded in April but the market will recovery shortly after, the consultancy said.