Afreximbank forecasts 10% rise in oil prices by 2021

December 29, 2020 12:55 pm

The African Export-Import Bank (Afreximbank) has predicted that oil prices will rise by 10 percent in 2021.

This was contained in the ‘Afreximbank African Commodity Index (ACCI) third quarter (Q3) 2020 report’, released on November 18, 2020.

ACCI tracks the price performance of 13 different commodities of interest to Africa and the bank on a quarterly basis.

It said the oil sector is expected to emerge from stagnation as global travel and global oil demand move towards pre-pandemic levels.

“However, the oil industry will need to clear the backlog of compensatory supply cuts that suppliers like Iraq and Nigeria owe in return for initially breaching output quotas.”

Nigeria had pledged to make up for its 180,000 barrels per day (bpd) overproduction in May 2020 by cutting an extra 45,000bpd each month between June 2020 and September 2020.

In Q3 2020, ACCI said the energy sub-index fell by 8 percent due largely to a sharp drop in oil prices in the latter part of the quarter.

It, however, said oil prices derived support in July 2020 and August 2020 from an increasingly positive global growth outlook as economies started to reopen following the lockdown.

Hippolyte Fofack, chief economist at Afreximbank, had said: “Commodity prices in Q3 2020 have largely been impacted by COVID-19.

“The pandemic has exposed global demand shifts that have seen the oil industry incur backlogs and agricultural commodity prices dwindle in the first half of the year.

“We hope to see an increase in global demand within Q1 and Q2 2021 buoyed by the relaxation of most COVID-19 disruptions and restrictions.’’

In early December this year, oil prices touched its highest level since March 2020 after COVID-19 vaccines (Moderna and Pfizer) were announced, which fueled bullish expectations of strengthening oil demand early 2021.

However, on December 22, 2020, following a new strain of coronavirus in the United Kingdom (UK), oil prices dropped by almost 2 percent that triggered concerns over fuel demand recovery.