Oil and gas demand growth is expected to be exceptional next year as the coronavirus vaccine takes hold and OPEC+ looks to constrain supply. In fact, U.K. based consultancy group Wood Mackenzie believes that by the end of 2021, Brent will surpass US$55.
“Hope is in the air – we continue to expect an exceptional year for oil demand growth, up 6.6 million b/d as the global economy rebounds,” WoodMac said in a new analysis published on Friday.
The consultancy group said OPEC+ will be entering 2021 constraining supply and nursing the market back into balance.
“The 0.5 million b/d increase of supply from January, cobbled together as a compromise by the group, will go toward meeting resurgent demand,” WoodMac said. “We think Brent will move above US$55/bbl by end 2021.”
However, WoodMac was quick to point out that more delays in controlling the pandemic would stall demand recovery. “Iran looms large on the horizon. Iran may be tempted in coming months to increase exports from today’s minimal levels to test the geopolitics, adding to the challenges of OPEC+.”
Were sanctions to be lifted – unlikely until 2022 at the earliest – WoodMac said up to 1 million b/d of crude could return to market within months.
“The Biden administration could decide to return the US into the international deal. Any negotiations are not likely to begin until after Iran’s own presidential election in June 2021, and Iran must first comply with the significant hurdle of the Joint Comprehensive Plan of Action (the Iran deal),” WoodMac said.
Brent crude edged past US$50 a barrel for the first time since March as the rollout of the coronavirus vaccines increased optimism of a return in demand.