2020 was probably the toughest year in the modern era of the world and everybody has been affected by the pandemic in one way or another. Due to the limitations and quarantine, the production function has changed in many sectors which has created a gap between the supply and demand side. However, there are some good news coming up from different parts of the world. A remarkable part of the world population has received at least one dose of vaccine and the distribution is becoming faster and faster. Obviously, the first result coming to mind would be a better economic atmosphere. Many small and large-scale industries have finally found a chance to cover their losses with improving health conditions. What these improvements affect most in terms of production factors are oil prices.
Oil is still the main source of energy that is needed for economic growth and sustainability. How its prices will move in the future can be an answer for the industries.
Depending on the historical events, it is possible to say that the level of confidence in the global economy is negatively correlated to the strength of the US dollar. If the US dollar is weakening, it can lead to a bullish trend for oil prices. Additionally, vaccines will fasten the process of going back to the good old days, so people will demand more and consume more day by day. This consumption-led acceleration will likely to raise the oil prices in 2021.
According to the U.S Energy Information (EIA), the average price of Brent would be $49/barrel. This number is 14% higher than the oil price for the fourth quarter of 2020. EIA also foresees that the oil inventories will decline due to the increasing oil demand and decrease in the rise of OPEC+ oil supply. OPEC+ has decided to increase oil supply by 500,000 barrels a day in the next months. However, the anticipated number was 2 million barrels. The prices are set through a higher level of expected supply, thus there might be an additional increase in oil prices.
The explained reasons are only a part of the bigger picture. Oil prices are affected not only by these factors but also by other uncertainties. If the economy recovers slower than expected, a new type of Coronavirus emerges or there is a transition from oil energy to green energy, the oil prices can falsify the path drawn for themselves.