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Doha, Qatar: The onset of the Covid-19 pandemic in early 2020 ushered in a period of notable volatility in commodity markets, with crude oil experiencing significant fluctuations due to major global events, according to a weekly report by Qatar National Bank (QNB).
Initially, the pandemic caused a substantial drop in demand as global lockdowns were imposed, leading to a temporary collapse in market conditions. Inventories surged while demand plummeted to multi-decade lows, resulting in Brent crude prices hitting a low of USD 19 per barrel in April 2020.
However, a swift turnaround ensued following the nadir in April 2020. This recovery was fueled by a quicker-than-anticipated global economic rebound post-pandemic and active output management by OPEC+ members. Additionally, the onset of the Russo-Ukrainian war further boosted prices, propelling the Brent benchmark to USD 128 per barrel by March 2022.
Subsequently, crude prices underwent a significant correction. Factors contributing to this included a slowdown in advanced economies' growth and the gradual reopening of economic activities in China amidst Zero-Covid policies. On the supply side, OPEC+ ramped up production to counterbalance anticipated excess demand, while major economies such as the US, Europe, and China released strategic oil reserves. Consequently, oil prices averaged USD 82 per barrel in 2023, signaling a market correction.
Importantly, supply and demand equilibrium was achieved, resulting in price stability around the annual average of USD 71 to USD 94 per barrel. These fluctuations were less severe compared to the volatile swings observed in 2022, underscoring a more balanced market.
Looking ahead, Brent prices are anticipated to remain supported at current levels around USD 80 per barrel, with several factors reinforcing this projection.
Firstly, on the demand side, robust macroeconomic outlooks for China, Emerging Asia (including India), and the US are expected to drive global oil consumption growth. China's steady recovery, coupled with increased fiscal support and expanding industries like petrochemicals and air transportation, will bolster demand. Similarly, anticipated growth in India and the ASEAN-5 economies will contribute to demand.
Secondly, on the supply side, the surge in available volumes witnessed in 2023 is projected to taper off, leading to a tightening of physical markets.
Overall, crude oil prices are forecasted to stabilize near current levels, with fluctuations expected to hover around USD 80 per barrel in the coming quarters, barring unforeseen geopolitical developments.
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