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
Global inventories returning to normal
Oil price forecast depends on pandemic containment
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
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.
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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.