Crude Oil prices fell in March amid concerns about demand in Europe and the decision by OPEC+ to gradually increase production. Nevertheless, strategists at Capital Economics expect that supply will remain constrained and that demand will continue to recover, which should push prices higher in the coming quarters.
A strong rebound in global oil demand this year
“The ongoing easing of restrictions in the US should increase transport mobility and boost gasoline and kerosene (jet fuel) consumption there. Meanwhile, global industrial activity has now generally recovered from last year’s slump and no longer poses a significant headwind.”
“The decision by OPEC+ to ease recent production cuts means that supply should rebound in earnest from May. But elsewhere, we expect output to remain constrained. This is especially true in the US, where weak drilling activity suggests that production will be slow to rebound.”
“We still think that the global oil market will remain in a deficit for the rest of 2021. However, this deficit is likely to be smaller than we previously envisaged. As a result, we have revised down our Brent forecasts for Q2 and Q3 to $70 and $75 per barrel, respectively.”