Review of oil prices in 2020

• Published date: 01 July 2022
• Date: 01 July 2022
• DOI: http://doi.org/10.1111/oets.12112

First Quarter 2021

Until the last couple of weeks of the f‌irst quarter 2021, prices rose steadily—maintaining the generally bullish trend that

began in early November—helped by tight OPEC‐plus supply curbs which more than balanced weakdemand linked to

the Covid‐19 pandemic. But a resurgence in cases in Europe f‌inally broke the upward momentum and prices eased back

in late March.

January began with attention focused on an OPEC‐plus meeting held to decide on whether to go ahead with the group's

scheduled 500 000 bpd increase for February, as agreed in early December. However, unexpectedly, there was to be no

increase on January's level, and the Saudis volunteered an additional 1 mn bpd cut for February and March, which sent

prices sharply higher, with ICE March Brent jumping over $2/bbl on Tuesday 5th January to reach $53.60/bbl. Prices

edged up marginally over the following 2days as well, supported by news of a bigger‐than‐expected 8 mn bbldraw in

US crude stocks for the week ending January 1st. Prices then moved higher again on Friday 8th January on expectations

of a robust stimulus package from the incoming Biden administration in the United States, with NYMEX February WTI

settling at $52.24/bbl, and March Brent rising to $55.99/bbl.

Prices stayed f‌irm in the early part of the following week, with crude reaching its highest level for the month on the 12th

January at $56.58/bbl for Brent and $53.21/bbl for WTI. Levels then weakened the following day on the back of a stron-

ger US dollar, which makes oil more expensive for non‐dollar buyers; and concerns over continued high global stock-

piles, which most felt needed to fall before crude could move higher. There was also downward pressure from the

increasing likelihood of a quick rise in Iranian crude exports as the United States relaxes its approach under the new

administration. Oil prices then brief‌ly rallied after US crude inventories declined 3.25 to 482 mn bbl for the week ended

January 8th, before prices then came under pressure again as the dollar ralliedon the conf‌irmation of President‐elect

Biden's $1.9 trillion dollar stimulus plan late on January 14th. Prices slipped further the following day as the market

focus switched back to demand growth concerns after several cities in northern China were locked down due to a local

Covid‐19 outbreak.

The third week saw little movement in prices, with underlying concerns over widening Covid‐19‐related restrictions

related to the spread of new variants and outbreaks, offset by the ongoing OPEC‐plus cuts, along with the US stimulus

and vaccination package from President Biden—which should help cut US case numbers more quickly than had been

expected, while supporting large parts of the economy.Despite the additional lockdowns, demand looked to be holding

up far better than it had done during earlier waves, and given the Saudi cuts, analysts said demand was continuing to eat

into the stock overhang from Q2 2020. The week ended with Brent March crude at $55.61/bbl, up just 31 cents on

the week.

Crude then strengthened early the fo llowing week on reports of tight compliance withOPEC‐plus production quotas,

including catch‐up from Iraq to make up for earlier shortfalls,as well as worries of another shut‐in of Libyan output.

There was also upward pressure from easing Covid‐19 restrictions in some parts of the United States, and together this

pushed March Brent up 47 cents to $55.88/bbl on Monday 25th. The f‌inal trading days of the month sawlittle movement,

with prices ending at $55.89/bbl for March Brent—up almost $4/bbl on the month.

Prices rose sharply on the f‌irst day of February to 11‐month highsas the supply outlook tightened, with Saudi Arabia

beginning its unilateral 1 mn bpd cut (on top of OPEC‐plus cuts), while pandemic‐related demand concerns in Europe,

North America and Asia eased. March WTI rose $1.35 to $53.55/bbl and April Brent climbed to $56.35/bbl. Prices con-

tinued to edge higher each day through the f‌irst week of the month, boosted mid‐weekby an OPEC‐plus Joint Ministerial

Monitoring Committee meeting that highlighted the success of production cuts in lowering global oil inventories. By the

end of the week, prices had reached their highest levels in 13 months (prepandemic), with April Brent at $59.34/bbl.

A similar pattern was seen in the second week, helped by news of a 440 000 bpd rise in OPEC‐plus output in January,

which was 60 000 bpd below the 500000 bpd off‌icial target. April Brent rose to $61.47/bbl by the close on Wednesday

10th, with support from the tightening supply/demand balance, along with progress on a US stimulus package. Thursday

11th saw the f‌irst fall of the month after the IEA and OPEC joined other forecasters in further reducing their demand

outlooks for 2021. The IEA also noted a tightening market this year and signs of rising non‐OPECsupply growth. By

Friday,however, the upward momentum had returned, and crude futures climbed to fresh 13‐month highs as oil demand

outlooks improved on signs of progress with US vaccination distribution and the coronavirus stimulus package. March

WTI settled up at $59.47/bbl and April Brent reached $62.43/b bl.

The third week of February began with further price rises, especially for WTI, as an extreme cold snap in the United

States helped push up prompt demand and disrupt some crude supply in Texas, which tightened the market further.

By Wednesday 17th February, it was clear that about 4mn bpd of USoutput was down due to the freeze, along with

atleast2.6 mnbpd ofref‌ining capacity—pushing front‐monthWTI up to$61.14/bbl, while Brentreached$64.34/

© 2022 John Wiley & Sons Ltd10

Oil and Energy Trends: Annual Statistical Review