(Reuters) – Citi Research on Monday cut its 2021 oil price forecasts after a larger-than-expected rise in COVID-19 cases, but said tighter supply from OPEC and its allies would still lead to a gradual uptick in prices next year.
Citi cut its 2021 Brent and West Texas Intermediate crude price outlook by $5 to $54 and $49 respectively. It forecast oil demand to fall by 8.9 million barrels per day (bpd) in 2020, but rise by over 7 million bpd in 2021.
With prices remaining around $40, the Organization of Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+, are likely to continue complying with their agreement to curb output through the fourth quarter of 2020 and into the first quarter of next year, rather than increase production in January, the bank said in a note.
The group is scheduled to reduce output cuts of 7.7 million bpd by around 2 million bpd from January.
Reuters reported last week that OPEC+ is considering deeper oil output cuts early next year, citing one OPEC source and one source familiar with Russian thinking.
“We would expect a Biden presidency to bring Russia and Saudi Arabia closer together, reinforcing their alignment in managing oil markets via the OPEC+ framework,” Citi said.
Brent futures LCOc1 jumped more than 2% on Monday after Joe Biden’s win in the U.S. presidential election boosted appetite for riskier assets and offset concerns over the hit to oil demand from the worsening coronavirus pandemic. [O/R]