Despite the Covid vaccines, experts worry that demand recovery won't happen until 2023: File Image/Pixabay
On the last trading day of 2020, crude eked out another round of gains on Thursday, with Brent rising 17 cents to settle at $51.80 per barrel and West Texas Intermediate climbing 12 cents to settle at $48.52 per barrel.
The bad news is that for the year, Brent fell 21.5 percent and WTI 20.5 percent, plus U.S. gasoline futures fell 17 percent for the year, while U.S. heating oil futures dropped 27 percent.
The good news is 2020 is over, and the consensus from some analysts is that the dissemination of the Covid vaccines will end the pandemic and bring about a substantial economic recovery.
Edward Moya, senior market analyst, OANDA
New virus strains might complicate the outlook
John Kilduff, founding partner at Again Capital, summarized 2020 thus: "The first half was remarkable and unprecedented with a steep move lower and a snapback rally.
"Then it was like watching paint dry for several months through October."
In the greatest economic scheme of things, 2020 expired on high notes in several areas: U.S. natural gas futures posted their biggest yearly gain since 2016, helped by record liquefied natural gas (LNG) exports, and U.S. stock indexes ended the year on solid gains (meanwhile, Asian shares were hovering near record highs).
Looking ahead, Evercore ISI predicted that U.S. explorers will raise outlays by a mere 5 percent in 2021, but in other regions of the world, including Latin America and Europe, expenditures are forecast to grow more robustly.
But despite that and the highly-anticipated end of the Covid pandemic in 2021, some analysts are firmly fixed on short-term concerns: in a Reuters poll released Thursday, 39 economists and analysts forecast Brent crude prices would average $50.67 per barrel next year and WTI about $47.45.
In other words, they doubt much of a recovery will occur next year, and base their gloomy stance on the new Covid strain (despite scientists saying it too will be eradicated by the vaccines currently in use) and related travel restrictions.
Edward Moya, senior market analyst at OANDA, said, "New virus strains might complicate the outlook and lead to harsher lockdowns that will cripple the crude demand outlook for the first quarter."
Some analysts polled expected no oil demand return to pre-pandemic levels before late 2022 or 2023, but it should be noted that if the Reuters polling can be counted on for one thing, it is that the analytical prognostications are frequently proven to be wrong.