Analysts Raise 2021 Oil Price Forecast

Analysts at Fitch Solutions Country Risk & Industry Research have raised their average Brent oil price forecast for 2021, the company’s latest oil price outlook report has revealed.

The analysts now see Brent averaging $66 per barrel this year, up from the forecast of $64 per barrel made in the group’s previous oil price report, which was released back in March.

“The forecast implies a rest of year average of around $68 per barrel, broadly flat from spot,” the analysts stated in the May report, which was sent to Rigzone on Thursday.

“Strong economic data out of China and the U.S. and rising vaccination rates give cause for optimism. However, Covid-19 related risks continue to abound, most recently evidenced by the outbreak in India,” the analysts added in the report.

“In our view, a combination of easing supply constraints and lingering demand-side uncertainties will weigh heavily on further price growth this year,” the analysts continued.

Fitch Solutions analysts noted in the May report that a sustained break above the $70 per barrel level would likely trigger an upgrade to the company’s forecast. They added, however, that it is their belief that Brent will fail to break resistance under current market conditions.

“There have been some signs of deterioration in the health of the market of late, including narrowing backwardation in Brent and underperformance of physically versus financially-settled contracts,” the analysts said in the report.

“Speculative positioning has turned slightly more bullish over April, but the ratio of longs to shorts remains far below its Q1 highs. The growth in long positions has been relatively soft, perhaps pointing to a lack of faith in further gains,” the analysts added.

“In our view, the market is likely underestimating the risks related to future outbreaks of the coronavirus, the rise of new, more transmissible variants and the pace of the global vaccine roll out. Should Brent fail to close above $70 per barrel, the spiraling epidemic in India and outbreaks among other key Asian consumers could be the trigger for a partial relapse in prices,” the analysts continued.

Looking further ahead, Fitch Solutions analysts forecasted in the May report that Brent will average $64 per barrel in 2022, $65 per barrel in 2023, $70 per barrel in 2024, and $72 per barrel in 2025. The Bloomberg Consensus, which Fitch Solutions is a contributor to and which was highlighted in the company’s latest oil price report, sees Brent averaging $64 per barrel this year, $64.5 per barrel in 2022, $65.3 per barrel in 2023, $65 per barrel in 2024, and $66 per barrel in 2025.

To contact the author, email andreas.exarheas@rigzone.com