In February 2021, Brent Crude Oil prices reached $60 a barrel – a price level that had not been seen in over a year, since the start of the coronavirus pandemic. However, with the successful roll-out of the COVID-19 vaccine, optimism surrounding recovery from the pandemic has increased, having a direct affect upon oil prices. Prices were also boosted by the events that followed Joe Biden’s inauguration, specifically his lifting of sanctions on Iran.
However, does this mean that we’re back to normal now that oil has reached $60 per barrel and will the market continue to improve? This price increase could encourage you to take part in commission–free oil trading with a CFD broker on an online trading platform, and this is possible on sites like plus500.co.uk, for example.
In this article, we will attempt to predict whether oil prices will maintain their current position, as restrictions are beginning to be lifted and we start to return to normality.
Prices Increase in 2021
At the beginning of this year, Brent Crude, which is the global benchmark for oil prices, saw a price increase of 2.1%, which is the equivalent of $1.22. This caused the price to settle at $60.56 a barrel and according to market data released by the Dow Jones, this was the highest valuation since January 2020, when the market was directly impacted by concerns surrounding the coronavirus pandemic. These concerns caused a decrease in demand for oil and therefore drove oil prices down dramatically.
Brent Crude was not the only oil to benefit from a rise in market optimism, as West Texas Intermediate (WTI) Crude also rose by 2%, reaching $57.97 a barrel on the New York Mercantile Exchange market. Once again, this was a price level that had not been seen since January 2020.
March 2021 Oil Prices
The average price of Brent Crude oil in March 2021 was $65.41 a barrel, which was nearly double its price in March of the previous year. As previously stated, Brent Crude is the global benchmark for oil and two thirds of the world’s traded crude oil bases its prices upon this strain.
Once again, the increase of oil prices in March can be attributed to the success of the coronavirus vaccine rollout, which drove a rise in demand for oil, as economic activity was beginning to resume. However, this rise in price is also due to the fact that the supply of oil has been limited by the Organisation of the Petroleum Exporting Countries (OPEC), caused by a decrease in demand during the pandemic.
The Future for Oil Prices
The outlook for oil prices seems positive, and it would appear that the market is beginning to return to normality, influenced by the world’s optimism towards a global resumption of normality in the near future. The Energy Information Administration (EIA) predicts that global oil demand will increase by 5.5 million barrels per day in 2021 and that this will continue into 2022, where it could experience a further increase of 3.7 million.
This positive outlook is reflected in the United States’ crude oil producers and their increase in supply. It is anticipated that this production could average 10.9 million barrels per day in the second quarter of 2021 and could reach 11.9 million in 2022.
Though oil prices have experienced unprecedented volatility in the past year, caused by a range of factors – but most dramatically by the coronavirus pandemic – it would appear that they are returning to normal in 2021. Some of the main factors that will affect oil prices are a strengthening dollar and a rise in US oil production, and since there is optimism surrounding both of these improvements, the future looks far brighter for oil prices.
