After a dark year, everything points to a clear recovery in fuel consumption next year.

It remains to be seen whether OPEC and Russia will be able to agree to continue restricting their production.

And if American shale will move forward if the price of a barrel rises.

2021 will be the year of the rebound for oil markets. After a historic year of 2020, marked by the collapse of the price of a barrel, most indicators are green and call for a rise in prices. Fuel consumption has not returned to normal in North America and Europe, but it is not far from there, despite the relockdown decided in most Western countries

Sales of gasoline and diesel have returned to pre-crisis levels in China and Japan, the second and fourth largest consumers of black gold, respectively. In India, Indian Oil announces that its refineries are operating at full capacity. And the record surpluses that have accumulated in tanks around the world since spring are finally receding. “Stocks are in the process of falling,” MUFG analysts note

Faster than GDP

The 2020 crisis was exceptional for the oil market because it penalized mobility, and therefore fuels. Oil consumption has fallen 1.6 times as much as GDP, Citi experts have calculated, while the ratio between crude demand and the economic downturn has historically averaged 0.4. “It is therefore reasonable to expect that demand will recover faster than GDP in 2021, as mobility improves,” they write

Some experts are particularly optimistic. For MUFG analysts, global consumption could return to 100 million barrels per day, the pre-pandemic level, as early as next summer. The International Energy Agency is more cautious. It forecasts an average consumption of less than 97 million barrels per day in 2021. “Demand will remain low for longer than expected,” she said. It will still be significantly more than the 91 million in 2020.

any case, many experts predict a rise in prices in 2021. MUFG expects Brent to average $58 in 2021, compared to $38 in 2020, and $64 at the end of next year. RBC Capital Markets predicts an average price per barrel of $51.50 next year, not far from its current level ($51 on December

The price per barrel is all the more difficult to predict as it will also depend on the evolution of production. And the latter, as always, is far from being determined. Admittedly, the OPEC countries and their ten allies led by Russia continue to voluntarily limit their exports in order to support prices. Their agreement, in theory, will remain in force throughout 2021, with a gradual relaxation of quotas. But will this agreement hold?

The year 2020 was the scene of growing tensions within the cartel and its Russian ally. The price war between Moscow and Riyadh in March left its mark, and new fault lines emerged at the last OPEC summit at the end of November. The United Arab Emirates, traditionally an ally of Saudi Arabia, has questioned the quotas, saying it wanted to increase production.

For Citi, these dissensions are explained by a growing concern about the energy transition, which is weighing on oil demand in the medium term. More and more oil states want to maximize their production now, lest their assets end up “failed” sooner than expected - “stranded assets” are assets that could suffer depreciation as a result of the ecological transition. By announcing an increase in production by half by 2030, the Emirates would reduce the lifespan of its huge reserves from 90 years to 50 years

The shale issue

Markets are also looking across the Atlantic, among American shale oil producers. The year 2020 saw production in the United States fall, for the first time since 2016. Faced with falling prices, many shale oil operators stopped investing to drill new wells. This financial discipline is new: for years, shareholders of American companies have accepted that operators are in the red, betting on future growth

This new trend is limiting the recovery of US production, but for how long? Citi analysts expect it to rise again as soon as global prices rise again. Above 55 dollars per Brent, the battle for market shares between OPEC and American shale would resume. “Shale is a monster that can be slowed but not killed,” writes Bjornar Tonhaugen