Brent Oil Price Projections and Forecast
Brent crude oil is a major benchmark for crude oil prices around the world. This oil is sourced from the North Sea, but its price affects the oil production from Africa, Europe, and the Middle East.
There are many other oil classifications around the world, but Brent Crude and WTI are currently considered the most important.
WTI crude is extracted from the USA and does not have as big an impact as Brent Crude on the market. If you want to invest in oil, you will have to go through price projections of Brent Crude oil.
With the forecasts presented in this guide, you will be able to determine whether the risks of the market are worth the rewards.
What Should You Consider When Investing in Oil Markets?
The oil market can be extremely confusing, even to seasoned investors. In a single day, the prices may fluctuate significantly.
One thing you have to understand is that OPEC controls the supply of oil in the world, and this has a direct impact on the prices of the commodity. Even then, most investors consider it a good hedge against inflation.
Covid-19 and the Oil Market
In 2020, the prices of oil went down significantly because of the covid-19 pandemic. Given that fewer people were moving around, the consumption of oil around the world was lowered.
Between April and June 2020, the price of Brent Crude oil reached very low levels, and in the entire year, the average price was $41.69 a barrel. The prices would rise as governments started issuing vaccines against covid-19.
The Impact of the OPEC on the Oil Market
One factor that led to the fall of the oil market in 2020 was the oil price war between OPEC countries and Russia. Once Russia walked out of the meeting in March, the prices of oil would go down significantly as that marked the end of the OPEC Plus alliance.
Later in the year, the two bodies would agree to cut production, and this would help with the recovery of the market. In 2021, OPEC Plus has been meeting and chose to increase production gradually as economies around the world recover.
From July, the member countries agreed to increase production by up to 1 million oil barrels a day starting in August. This is set to continue until they phase out the 5.8 mb/d downward production adjustment.
The Gradual Recovery of Crude Oil Consumption
Crude oil consumption plunged 9% in 2020. With the opening up of economies, gasoline and diesel have both been able to get back to their pre-pandemic consumption levels.
However, jet fuel is still in low demand as fewer people are travelling by air.
Brent Oil Price Prediction According to the EIA
According to the US Energy Information Administration (EIA), Brent Crude oil prices will average at $60.74 per barrel in 2022. Although this will be a major improvement since the 2020 prices, it will still be lower than the pre-covid levels.
The same report indicates that the average Brent oil price in 2021 will be $62.26.
Predictions on Brent Crude Oil Prices According to the International Monetary Fund (IMF)
The International Monetary Fund also released their Brent Oil price forecast in the World Economic Outlook report. In their report, they indicate that the Brent oil price will average at $59.74 in 2021.
This price will rise to $56.23 in 2022. Here are other predictions that have been made by the International Monetary Fund:
- • The commission predicts that the average Brent crude oil price will be around $54.11 in 2023.
- • In 2024, the prices will go down to $52.96.
- • The prices will drop even further in 2025 when a barrel of oil will sell at a price of $52.42.
- • In 2026, the IMF predicts that the price of a barrel of oil will fall to $52.24.
Brent Oil Price According to the European Commission
The European Commission has not released projections on Brent oil prices for 2022. However, the commission has indicated that it expects the price to average at $56.10 by the end of 2021.
Long-Term Projections on Brent Crude Oil Prices by NEB
The National Energy Board is an independent Canadian government body that was set up in 1959 to regulate the energy sector.
This means it has to manage oil, gas, and electric utility industries. This body has made the following predictions regarding Brent oil prices:
- • The average Brent oil price in 2021 will be $43 a barrel.
- • In 2022, the NEB predicts that one barrel of Brent oil will sell at an average price of $45.40.
- • In 2023, oil prices will go up to $47.80 a barrel.
- • The prices will rise even further in 2024 and will reach an average price of $50.20.
- • In 2025, the NEB predicts that oil prices will go up further to $52.60.
- • By 2030, this board predicts that oil prices will have reached a price of $55.
Which Risks Should I Be Aware of When Investing in the Oil Market?
Long-term investments in the oil market are generally considered safe, and they will always cushion you from inflation and other economic uncertainties.
If you choose to make short-term investments in the market, you will have to deal with a number of risks. These include:
- • Price volatility
- • Price volatility
- • Possibilities of accidents such as oil spills
- • Legal and regulatory risks resulting from accidents
Price volatility usually results from increased production of oil, and this is why OPEC members had to control their production between 2020 and 2021. The problem can also result from a reduction in demand for oil, although this happens rarely.
For example, with the 2020 covid-19 pandemic, oil prices dropped to a 20-year low, and this was mainly because fewer people were travelling.
Most oil companies pay investors dividends regularly, but when the profits go down, they may have to cut the dividends. This can be an issue for investors who like to earn regular income from their investments.
Oil spills don’t just damage the environment; they can also lead to a drop in the stock price of an oil company. This can be devastating to investors.
As an example, BP suffered the Deepwater Horizon oil spill in 2010, and this dropped the company’s share price from $60 to $26.75. This marked a decline of about 55%.
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