Crude oil price: 2021 review; what to expect in 2022
- Crude oil price is finding resistance at $80 in the first session of the new year.
- Concerns over COVID-19 will remain a key driver in the ensuing sessions.
- Investors are also keen on January's OPEC+ meeting in the new week.
Crude oil price is finding resistance along the crucial level of $80 in the first session of the new year. In the ensuing sessions, COVID-19 concerns and the OPEC+ meeting will be key drivers.
2021 price review
The oil market has been characterized by steady recovery in the just concluded year. This follows the drastic decline in demand in 2020 as coronavirus hit hard worldwide.
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Brent futures, the benchmark for global oil, surged by about 50.5% in 2021. Similarly, the benchmark for US oil -WTI futures – rose by 55.5%; the highest annual rate since 2009 when it recorded an increase of over 70%.
Financial stimulus from various governments boosted oil demand. Besides, the decision by OPEC+ to control supply aided in crude oil price recovery.
Nonetheless, prices have been subject to heightened volatility as the market reacts to coronavirus-related developments. In particular, investors and analysts were highly optimistic in Q4’21. The heightened demand confidence yielded a forecast of $80 per barrel. Indeed, the Bank of America further predicted that crude oil price would hit $100 per barrel.
Amid the bull market, Brent and WTI futures reached the year’s peak in October. At that point, Brent was at its highest level since 2018 at $86.70. During the same period, WTI was at a 7-year high at $85.41.
New year outlook
In the new year, COVID-19 developments will remain a key driver of crude oil price. In the past year, the highly transmissible Omicron variant pushed prices to an over three-month low of $65.74 in early December.
US health officials have warned of severe disruptions in coming weeks. This is founded on the forecast of coronavirus cases rising significantly as a result of the holiday travels. The reopening of schools post-winter and New Year celebrations may further worsen the situation.
At the same time, investors are keen on the OPEC+ meeting scheduled for this week. In its December meeting, the alliance maintained its plan to increase output by 400,000 bpd in January as has been the case in recent months. This is despite the expected move to pause on the program. There had been heightened concerns over the impact of the Omicron variant on global oil demand.
Eased coronavirus fears and the probable continuation of OPEC+ output program will boost demand confidence. According to the Bank of America, crude oil price will likely surpass the $120 per barrel mark by end of June 2022.