18.01.202115:07 Forex Analysis & Reviews: Deficit for the first time in four years: what awaits the oil market in 2021?

Long-term review

Analysts believe that this year, the black gold market will be in short supply for the first time since 2017. In the short term, oil may cross the $60 per barrel mark, as the market moves into a deficit on an annual basis for the first time since 2017.

The growth in demand for black gold against the backdrop of mass vaccination against COVID-19 will be spectacular, but consumption is likely to reach the level of last year no earlier than the first half of 2022. Experts suggest that the deficit in the oil market will begin to be felt in February of this year, and closer to its end it will be very impressive.

Exchange Rates 18.01.2021 analysis

OPEC predicts an increase in oil consumption from 90 million to 95.9 million barrels per day. The main part of the growth will come from developing countries - China and India. Oil production in the United States will gradually recover, but its projected growth will be only 0.12 million barrels per day, which will not have much impact on the market.

Of course, OPEC countries will have to keep their finger on the pulse of the black gold market. Recall that at the beginning of 2021, the parties to the agreement extended the existing level of production cuts for February and March of this year.

Analysts believe that a tangible gap between supply and demand will emerge in 2–3 quarters of the current year against the backdrop of a reduction in black gold reserves and a recovery in demand. Stocks in OECD countries are expected to normalize by the end of the summer.

Market participants are still in no hurry to invest in oil stocks due to the fact that about 9 million barrels per day of OPEC capacity remains unused.

Experts believe that the main factor in 2021 will be an increase in dividends and the resumption of share buyback procedures. The most likely competitor is the Anglo-Dutch oil and gas company Shell.

Shell is likely to cut its debt by $65 billion earlier than projected, which will lead to the fact that it will start a cash-back policy earlier than others.

Of course, BP is also well-positioned to capitalize on higher black gold prices, but due to the company's large debt, it will take longer for the profit to reach shareholders.

Irina Maksimova,
Analytical expert
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