Analysts downgrade 2021 forecast for oil to $70 per barrel, predicting that coronavirus variants may cool demand recovery

Covid-19 variants, along with the slower-than-expected return of Iranian shipments, will reportedly continue affecting the global markets for crude until the end of the current year, remaining a major source of volatility.

According to the monthly Reuters poll, $70 per barrel looks to be a more realistic projection for Brent Crude prices for the rest of 2021, rather than the previously predicted $80 per barrel.

The survey of 38 analysts suggests Brent might hover at around $68.76 per barrel – up slightly from June’s $67.48 estimate. So far this year, the global benchmark averaged around $66.57.

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“The wax and wane of Covid-19 waves will have more of an influence on sentiment than supply-and-demand fundamentals during the rest of the year, as we do not expect politicians to impose hard and broad-based lockdown measures anymore,” Julius Baer analyst Carsten Menke said, as cited by the agency.

The expert added that oil politics is expected to remain another source of volatility, especially if prices do overshoot this summer, raising the pressure on producers to react.

Earlier, the Organization of the Petroleum Exporting countries and allies (OPEC+) struck another deal to raise oil production by two million barrels per day (bpd) from August till December 2021, after prices hit nearly 2.5-year highs.

“With rising OPEC+ output, a possible comeback of US production in the second half of 2021, and Covid-19 still threatening to cool down oil demand once again, I think $70 is a more realistic level for oil,” LBBW analyst Frank Schallenberger told Reuters.

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Although OPEC+ and the International Energy Agency have predicted demand will reach pre-pandemic levels as soon as next year, China and other Asian nations are still imposing restrictive measures against rising coronavirus cases.

Global prices for crude will also be affected by a delay in the return of ‘wildcard’ oil supplies from Iran, which is currently awaiting the lifting of US sanctions.

“It looks likely that Iran will be a 2022 story now, boosting oil market prospects in the near-term but possibly dampening the trajectory in 1H-2022,” said DBS Bank analyst Suvro Sarkar.

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