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Oil Market Snapshot – January 2021 Brent Solid At $55/bbl As Saudi Surprise Outweighs Fresh Lockdowns

  • Brent has held at $55/bbl for most of January despite a softening of the 2021 demand picture, as Saudi Arabia announced a surprise 1 million b/d "voluntary" production cut for February and March
  • We see Brent averaging $53.59/bbl in 2021 (+$3.21/bbl), reflecting improved market sentiment following commencement of vaccinations, the Saudi cut and the US presidential transition
  • Our global demand growth forecast for 2020 falls to -8.95 million b/d (-20,000 b/d on previous) with the re-imposition of lockdown measures that, nevertheless, are less restrictive that 1H20
  • However, we decrease our 2021 demand growth forecast to +5.83 million b/d (-110,000 b/d on previous), as rising OECD cases mean restrictions are now likely to remain in place until 2Q21
  • The IMF has increased its global GDP forecast to -3.5% (+0.9 p.p. on previous) and +5.5% (+0.2 p.p.) for 2020 and 2021, respectively, with China and the US to lead the recovery
  • Our global supply growth forecast for 2020 increases to -6.27 million b/d (+410,000 b/d on previous), mainly due to revised US production data indicating a smaller fall in production
  • We lower our 2021 supply growth forecast to 3.4 million b/d (-190,000 b/d on previous), as broadly flat US LTO production entry-to-exit translates into a steeper annual average decline
  • After a challenging decade that has seen impressive cost savings, deepwater projects are becoming more attractive as US LTO stutters
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