Oil prices are expected to remain lower even once the coronavirus pandemic is over and the economy recovers.
Before a perfect storm hit the industry in 2020, medium-term price expectations had been firmly anchored around $65-70 per barrel, based on the average annual price of Brent crude.
While prices cycled higher and lower in the short term, there was a strong and resilient consensus they would return to this level over a five-year time horizon.
But the extraordinary shocks to production and consumption last year have shaken this confidence and caused most observers to cut their medium-term expectations by around $5 per barrel to $60-65.
Brent is expected to average $55-60 per barrel this year, down by $10 from a previous forecast of $65-70, as the industry gradually pulls out of last year’s slump.
By 2024, Brent prices are expected to average $60-65 per barrel, but that is still down by $5 from a forecast of $65-70 previously.
Expected prices had been drifting lower since 2018 but the pandemic and volume war between Saudi Arabia and Russia have accelerated the downward trend.
The results are based on responses from more than 950 energy market professionals, part of an annual survey conducted by Reuters, now in its sixth year.
Among survey respondents, 27% are directly involved in oil and gas production (exploration, drilling, production, refining, distribution, marketing and oilfield services).
Most of the rest work in banking and finance (18%), research (10%), professional services (8%), physical commodity trading (6%), hedge funds (6%) and other energy businesses (5%).
In this year’s survey, respondents’ price expectations are tightly clustered between $55 and $60 for 2021, rising to $55-70 by 2025.
Uncertainty, as measured by the dispersion of responses, increases as the forecasting horizon moves further into the future, which is what would be expected.
But the amount of uncertainty at each time horizon was the same in this year’s survey as in previous surveys despite the unprecedented shock.
Full results from this year’s survey and all the surveys between 2016 and 2020 can be downloaded via this link:
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