May 2021

Oil Price Forecasts

According to the U.S. Energy Information Administration’s (EIA) Short-Term Energy Outlook, after approaching a 2021 high in early March of almost $70/barrel, Brent crude oil prices declined to between $60/barrel and $65/barrel in mid-March through the first half of April. However, in the second half of April and into early May, crude oil prices began to rise, likely as a result of crude oil and petroleum product inventory draws and higher expectations for summer gasoline demand, particularly in the United States.

The rise in oil prices was likely reinforced by macroeconomic indicators that pointed to continued economic recovery and led to price increases across a broad range of commodities. The price increase also reflects supply limitations by the Organization of the Petroleum Exporting Countries (OPEC) and OPEC partner countries. OPEC has been limiting oil production due to decreased demand during the pandemic. At its April 2021 meeting, OPEC announced it would begin to increase oil production. The EIA expects global oil production to continue to increase in the second half of the year to keep pace with rising demand. Increased production puts downward pressure on crude oil prices: the Brent price falls to $63/barrel in the third quarter and $60/barrel in the fourth quarter of 2021.