More space is being created on the oil market for Guyana’s medium sweet Liza Crude as prices are expected to rise amid a coming shortfall in supply.
According to the findings of a Reuters Poll published on Friday, oil prices will stage a steady recovery this year as vaccines reach more people and speed an economic revival, with further impetus coming from stimulus and output discipline by top crude producers.
The survey of 55 participants forecast Brent crude would average $59.07 per barrel in 2021, up from last month’s $54.47 forecast.
This is the biggest month-on-month upward revision for the yearly forecast in Reuters polls going back until at least 2016.
Production in Guyana at the Liza Phase 1 Development remain robust at around 120,000 bpd, despite some recent challenges with a gas compressor onboard the SBM Offshore-operated Liza Destiny FPSO. The equipment is being repaired in Germany and is expected to be returned soon.
Output, which will surpass the 500,000 bpd mark by 2025, is expected to help full the global supply gap and eventually catapult the country to among the top three Latin America producers by the end of the decade, when production surpasses the 1 million bpd mark.
European refiners have also been moving away from sour varieties like Russian Urals, which have risen in price since a supply cut pact by producer countries made the grades scarcer, towards alternatives like U.S. West Texas Intermediate (WTI), West African grades, CPC Blend and Azeri oil.
Robert McNally, author of Crude Volatility and founder of Washington D.C.-based Rapidan Energy Group has said crude oil can be heavy and dirty with a high sulfur content which diminishes its value or it can be very light “like champagne” with low sulfur.
“Guyana’s crude happens to be middle grade in weight and low sulfur which means clean right from the ground. So, it’s a perfect oil for making jet fuel and the products that are in very high demand,” McNally said.
According to Reuters, of the 41 respondents who participated in both its February and January polls, 32 raised their forecasts.
Most analysts said the Organization of Petroleum Exporting Countries and allies (OPEC+) may ease current output curbs when they meet on March 4, but would still agree to maintain supply discipline.
“With OPEC+ endeavouring to keep global oil production below demand, inventories should continue falling this year and allow prices to rise further,” said UBS analyst Giovanni Staunovo.
Oil demand was seen growing by 5-7 million barrels per day in 2021, as per the poll.
However, experts said any deterioration in the pandemic situation and the possible lifting of U.S. sanctions on Iran could hold back oil’s recovery.