The oil sector was hit harder than almost any other by the pandemic. Crude prices fell from near $70 a barrel at the beginning of the year to below $20 in April as lockdowns slashed fuel demand. Prices even briefly turned negative in the US. After a short but highly damaging price war, Opec and Russia enacted record supply cuts to stabilise the market. But even then, companies were forced to rip up investment plans while European energy majors started to look to a greener future.
As the industry’s turbulent year draws to a close there are, however, signs of a nascent recovery. Crude has crept back to $50 and some investors are betting that the oil cycle is turning, even as expectations of peak demand loom over the horizon.
Here are the five things to watch in 2021:
Oil demand
Average oil demand will probably rise by the most on record in 2021. But that is essentially where the good news on consumption ends for oil bulls, with demand expected to be well below pre-pandemic levels. The International Energy Agency projects consumption will rise by almost 6m barrels a day in 2021 but will average just 96.9m b/d — still well below the prepandemic record of loom b/d in 2019. Oil demand was also originally forecast to expand by about 1m b/d in 2020 and 2021. That means consumption in 2021 should be at least 5m b/d below where it would have been without coronavirus. In 2009 — as the world economy was slammed by the financial crisis — oil demand fell by just over 1m b/d.