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Markets

Oil prices to drift higher despite India demand hiccup

  • Demand growth seen at 5.5-6.5 million bpd in 2021.
  • Fifth straight upward revision to the 2021 Brent consensus.
  • Benchmark Brent crude to average $64.17/bbl in 2021.
  • US crude forecast to average $61.01/bbl this year.
30 Apr 2021

Oil prices will inch higher this year as vaccines revive demand and OPEC+ keeps a leash on supply, but the worsening COVID crisis in India and elsewhere poses a roadblock, a Reuters poll showed on Friday.

The survey of 49 participants forecast that Brent would average $64.17 in 2021, up from last month's consensus of $63.12 per barrel and the $62.3 average for the benchmark so far this year.

This is also the fifth straight upward revision in the 2021 consensus, and also the highest outlook for the period since January last year.

"With vaccine rollouts gaining pace this year, we anticipate people will likely go out again and businesses will fully reopen over the coming quarters - indeed, this is already happening in the US and the UK," supporting demand and pushing Brent to about $75 in the second half, UBS analyst Giovanni Staunovo said.

Oil demand was seen growing by 5.5 million-6.5 million barrels per day (bpd) this year.

This was in line with a cautiously optimistic picture drawn by the International Energy Agency earlier this month that producers may then need to pump 2 million bpd more to meet the expected demand.

The Organization of the Petroleum Exporting Countries has also raised its forecast, although three sources from the OPEC+ joint technical committee (JTC) flagged surging COVID-19 cases in India and elsewhere as a concern.

"The recent rise in COVID-19 cases in Europe, India, and Brazil, along with the risks associated with fast-spreading variants, could blunt the world oil demand recovery," said Marshall Steeves, energy markets analyst at IEG Vantage.

India, the world's third-biggest oil consumer, is being hit hardest by the pandemic, with large parts of the country now under lockdown. But some analysts say the impact may be limited.

"India oil demand growth will be affected for a couple of months at least, but may not make a major enough dent to global oil demand recovery," said Suvro Sarkar, an analyst at DBS Bank.