Oil prices are set for a slow crawl upwards this year as the gradual easing of coronavirus-led restrictions buoy demand, although a second COVID-19 wave could slow the pace of recovery, a Reuters poll showed on Friday.
The survey of 43 analysts and economists forecast benchmark Brent crude to average $41.50 a barrel in 2020, up slightly from the $40.41 consensus in last month’s survey and compared with around $42 average for the benchmark thus far this year. It is expected to average $49.85 in 2021.
The 2020 outlook for West Texas Intermediate rose to $37.51 per barrel from June’s $36.10.
Oil is “caught-up in a step-wise re-balancing process” with the “pieces moving in the right direction” on the supply side, said Harry Tchilinguirian, head of commodity research at BNP Paribas.
“It’s in demand recovery where the uncertainty lies, with COVID-related developments generating concerns that the pace of re-opening may be impeded.”
The poll projected global demand to contract by between 7.2 and 8.5 million barrels per day (bpd) this year, versus last month’s 6.5-8.7 million bpd prediction.
A promising vaccine for the virus could, however, fast-track economic recovery and in turn boost oil prices, analysts said.
“A breakthrough of the $40-$45 range is possible if the comeback of the global economy will be faster and stronger than expected,” LBBW analyst Frank Schallenberger said.
The International Energy Agency raised its 2020 demand forecast earlier this month to 92.1 million bpd.
Brent prices have rebounded sharply since plunging to an over 20-year low in April, helped by production cuts by OPEC and its allies starting in May, apart from the gradual lifting of lockdowns, prompting the producer group to decide on easing the record supply reductions from August.
“The decision to ease curbs provides them (OPEC) with an easy solution to reverse them if the demand recovery suddenly stalls,” said OANDA senior market analyst Edward Moya.