Oil prices are expected to remain subdued into the new year, with murky prospects for the global economy and supply of crude weighing on the outlook.
Futures for West Texas Intermediate, the U.S. benchmark for oil, will likely be about $43.25 a barrel in the first quarter, according to a survey of 10 investment banks, suggesting the market will remain within a narrow band. WTI futures slid 0.4% to $45.53 a barrel Friday.
Next week’s meeting of the Organization of the Petroleum Exporting Countries and its partners, at which the alliance will decide on production levels from January, will determine the direction of the market in the short term, analysts said.
Over the longer haul, uncertainties remain. Covid-19 vaccines could boost global economic prospects and bolster demand for oil in 2021, if there is widespread distribution of the shots. However, elevated levels of coronavirus cases in both the U.S. and Europe could prompt fresh restrictions on travel and business, weighing on demand.
“We’re going to continue to have volatility as we get to the end of the Covid pandemic,” said Richard Fullarton, chief investment officer at hedge fund Matilda Capital Management. “We don’t know if or when the vaccines will come in, we don’t know if OPEC will cut or raise production too early, and we’ve got a new president.”