The oil market outlook: a speedy recovery


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Crude oil prices have recovered from their COVID-19 slump, driven by firming demand and continued production restraint by OPEC and its partners (OPEC+).  As demand gradually returns to pre-pandemic levels and OPEC+ raises production, crude oil prices are expected to average $56/bbl in 2021 and $60/bbl in 2022. Risks to the outlook include a more prolonged pandemic, a breakdown of the OPEC+ agreement, and the response of U.S. shale.


OPEC+ production cuts continue to support prices

The recovery in prices has been largely due to continued production restraint by OPEC+. While the group has increased production since the start of 2021, this has been more than offset by Saudi Arabia voluntarily cutting an extra 1 million barrels per day from February 2021.

Crude oil consumption gradually recovering

Crude oil consumption continues to slowly increase after plunging 9% in 2020. Gasoline and diesel have mostly returned to pre-pandemic levels, but jet fuel consumption remains considerably lower as air travel has been slower to recover. 

Global inventories returning to normal

As a result of the pickup in oil consumption and continued restraint in production, global oil inventories have fallen. While they remain above their pre-pandemic levels, this may be due in part to increases in strategic stockpiles. 

Oil price forecast depends on pandemic containment

Oil demand growth estimates have been revised upward recently, reflecting the improved economic outlook and policy support measures. But the expected recovery in demand depends on the pandemic being successfully contained.  Renewed outbreaks and lockdowns could extend the weakness in oil demand and lead to lower oil prices.

U.S. oil production could surprise in either direction

The U.S. rig count has risen alongside oil prices and is now more than double its August low.  While a further increase in the rig count will be needed before production starts to rise, the U.S. shale industry has repeatedly proved more innovative and resilient to price collapses than expected.

rakita ole ntutu
August 23, 2021

on climate action plan involve existing land owners of conservancies at village level as a team work with government and local government environmental agencies to get a proper and current land use system and see if it can fit future ecosystem needs, a picture today and future world united with god we are going to revive all the gains lost during covid-19 our way is clear know I personally thank the world bank keep up the good work thanks.

Zachary Weiss
August 23, 2021

I agree with the assessment that the demand, and therefore the cost, of oil will rise as the world recovers from the Covid-19 pandemic. It makes sense to me that the as planes, commuters, and activity-doers return to their previous habits, more oil is consumed. I am apprehensive, however, that this is for the better. I am worried that the implications of increased prices of oil will negatively affect the citizens of our world, especially the poorer ones. The prices of my local gas station, which during the pandemic were as low as $2.89 per gallon, are now as high as $4.39. If I had the need to commute daily, let’s say 20 miles in each direction, I would end up spending almost $9.00 a day just on gas I use commuting. It is also true that those who have less economic wealth have to commute further. I believe that the increase in the price of gas disproportionately affects those who may already be hurting. Additionally, the according to your graphs, there doesn’t seem to be a decline in gas prices either now or any time soon. This is scary for those who already worry about the economic feasibility of having a car, what with the price of a mortgage, gas, and insurance. I think one way of solving this problem would be to reduce the amount of demand there is currently for oil. One way of doing this would be to incentivize electric or hybrid cars. The government could do this by offering to pay a portion of the cost of the car to the seller, therefore making the price of the electric cars cheaper for the people. There are many ways to do this, but I believe that is is very important that the price of oil does not continue to rise globally.