In recent weeks, the world took a significant step in the pursuit of overcoming the health crisis of COVID-19. The promising results of two vaccines —the product of unprecedented technological achievements in the health field— pave the way for the return to a normal state that allows the full economic revival that humanity needs so much.

The oil market, which is particularly sensitive to this type of global event, has been subject to doubts due to the second wave of contagion that has taken place in Europe and America. However, the outlook for 2021 looks encouraging. 

First, there is all the progress made with vaccines, which analysts hope will be successfully distributed to enough people so that by mid next year, we can begin to resume routine activities without the constraints of the pandemic. Also, we have the possibility that OPEC will decide to maintain production cuts for at least another quarter, which increases the likelihood of higher oil prices in 2021.

A mix of factors supports this scenario: oil and gasoline inventories, while still high, are down from this year’s peaks; control of the pandemic in Asia has strengthened demand in the region; and some industries will begin preparing for a potential revival in a few months. 

There are already several analysis groups suggesting that the price of Brent will average around $50 by 2021. However, these projections have several uncertainties along the way.

Factors to monitor in the coming weeks

As in all forecasts, there are particular elements that we must understand. Therefore, it is essential to point out some of the factors to consider regarding what will condition the industry in 2021 so we can make informed decisions.

For example, in the United States, gasoline inventories have risen in response to the beginning of the December season. Nevertheless, estimates indicate that by Thanksgiving, only half of the Americans who traveled in 2019 will do so in 2020, which signals that demand is and will continue limited in the short term.

Moreover, the management of this second wave of COVID-19 will largely determine the economy’s state by the time the pandemic is under control. If many countries need to impose further restrictions on their economies, the damage to industries will lengthen the recovery process, affecting demand in the energy market.

On the other hand, the outlook of recovery for this crisis appears -overall- better than, for example, the one of the 2007 financial crisis, for some people. This time, the average person’s debt is under greater control, and there is hope that there will be a repressed demand that will manifest itself once sanitary conditions are safe for investments, travel, and transportation in general.

Very much in the style of 2020, we are in an uncertain and challenging scenario. However, in Nakasawa and around the world, we must be enthusiastic about the progress made, and we need to prepare for a much better 2021.

by info@nakasawaresources.com