March 2021 – Mariana Vargas – In 2021 oil demand is reaching pre-pandemic levels thanks to the easing of lockdown measures in key countries; China and India. These two large countries are showing a glimpse of what the world could be like, while coexisting with COVID-19 until a high trusted vaccine reaches the market.
China and India are the 70% of the growth in the oil demand, channeling it in transportation demand, industrial activities and government stimulus programs. The “coexistence” of humanity with COVID -19 is showing that people prefer to buy their own cars whether than to use public transportation to avoid the high risk of contamination. Industrial activities are also part of this normality, well most citizens are willing to work in these conditions, than to be unemployed, a year has passed and savings are gone. Europe and North America are leads in the 30% residual within hand of Latin America. Demanding also fuel, diesel and as for North America and Europe; winter fuel.
A demand yielding to a 60$ barrel. OPEC and IEA have stated that the markets behavior is a positive symptom and they might be correct, however we are also seeing that the market is being driven by hopes and prospects, rather than a hard reality. Markets are opening: yes. Will the price be kept or will it rise?
In 2020 we witnessed a demand contraction, therefor most traders are being encouraged to drain their storage tanks to ease the current supply gut, and the perfect example is Saudi Arabia, cutting 1 million barrels of their present output, to ease their brimming storage. As for refineries their pace will vary by region and fuel type, they most likely resume to increase activity in the 2Q21. As for now, jet fuel demand will probably be maintained as the weakest performer until international travel resumes.
As for projections we are expecting oil prices to maintain in a 52$- 55$ average in the short run according to EIA and IEA, thanks to the stableness the market has shown, although a successful vaccine may create a V shaped recovery from all the uncertainty inside the market and push prices higher in the long run, an optimist outlook to the reliance the market has of COVID-19. As for 2021 oil production is expected to increase in comparison to 2020 figures, but below 2019 numbers, reaching an average of 97,4 millions/bpd, according to OPEC figures and projections.
As for commodities, 2021 seems to be expecting a bull market thanks to the lack of supply and a weak Dollar. Demand for consumer – related commodities has been tepid, thanks to COVID-19; however supply isn’t at its best either, except for cocoa, coffee and iron ore.
2020 will forever be remembered as the year the world stopped. 2021 will be the year the world began with a new normality.