Crude To Be Around USD 60 Per Barrel In 2021

Global crude oil prices are expected to be in the range of USD 60 a barrel over the long term period as OPEC+ decision to cap supply until demand recovers and the pandemic continuing to keep a check on consumption.

According to a research report by ICICI Securities, Brent has recovered and is over USD 60/ bbl since February, 21 vs April, 20 low of USD 21/bbl driven by demand recovery from lows and OPEC+ capping supply to ensure supply deficit since July last year.

"OPEC+ capping supply until demand recovers is estimated to ensure supply deficit of 1.3 million barrels of oil per day in calendar year 2021 and keep Brent above USD 60/bbl," the brokerage said.

The expectation for the crude was that it may surge in 2021 on the back of economies recovering as vaccinations tamed the spread of COVID-19. But the lockdowns again due to fresh surge in Covid cases has delayed demand recovery in Europe.

Also, the probability of US sanctions on Iran's oil exports being lifted appears to have increased substantially. EU and other signatories to the nuclear deal are talking to Iran and US separately to bring them on the same page and revive the deal. Indications are that US sanctions on Iran exports may be lifted as early as before Iran's presidential elections due on June 18.

"While OPEC+ capping supply should keep Brent above USD 60/bbl, delay in demand recovery and US lifting sanctions on Iran exports would cap further rise. We estimate long-term Brent at USD 60/ bbl," ICICI Securities said.

With regard to gross refining magind (GRMs) the outlook is modest as capacity addition is expected to exceed to refined products demand growth. Besides, hit to demand from Covid worsened the outlook. Before the Covid hit, BP Plc estimated that global liquids demand would rise by 10m b/d, but demand for refined products would grow by just 3m b/d by CY40. 9m b/d of refining capacity is under construction or planned mainly in China, India and Middle East.