U.S. | Oil Prices Outlook. January 2021

Summary

Economic recovery, output cuts, and progress on Covid-19 vaccination have boosted oil prices. OECD inventories are receding from above-average levels, implying a tighter market.

Key points

• Key points:
• Supply remains below pre-pandemic levels but, higher prices and Saudi Arabia’s unexpected cuts are likely to incentivize an increase in production in the following months.
• Short-term risks are tilted to the downside: oil prices are likely to experience a volatile first quarter, the upside from fiscal stimulus and economic recovery will be limited by increasing contagions and new lockdown measures.
• As vaccination rates accelerate, demand will recover faster. We expect this to become more evident by 2H21.
• Beyond 2021, lack of investments during the pandemic may result in a deficit that could lead to higher prices.

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