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Oil Price Fundamental Daily Forecast – IMF Doesn’t See Dramatic Price Recovery Anytime Soon

James Hyerczyk
·3-min read

U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading steady to lower on Monday shortly after the regular session opening, pressured by concerns over rapidly rising coronavirus cases globally and by supply worries after Libya announced plans to boost output.

At 13:13 GMT, December WTI crude oil is at $41.00, down $0.12 or -0.29% and December Brent crude oil is at $42.81, down $0.12 or -0.28%.

Crude oil prices are finding some support due to a weaker U.S. Dollar. Since crude oil is a dollar-denominated commodity, it tends to rise on foreign demand when the dollar weakens. The dollar is being pressured by renewed hopes for a U.S. fiscal stimulus package.

IMF Reveals 2021 Forecasts for Oil Prices and Middle East Economy

The International Monetary Fund (IMF) downgraded its outlook for Middle East and Central Asian economic recovery, predicting a 4.1% contraction for the region as a whole – 1.3 percentage points worse than its previous assessment in April – in its latest regional outlook report released Monday.

Jihad Azour, director of the IMF’s Middle East and Central Asia department, noted a large disparity in economic loss between oil importing and exporting countries as the region has been hit by the coronavirus pandemic and a plunge in oil prices.

Oil Prices Will Remain Under Pressure, IMF Says

Oil prices will be the most important factor for oil exporters’ recovery, particularly states like Saudi Arabia, Iraq, Iran, the UAE, Bahrain and Kuwait, for whom the commodity makes up the majority of revenue. While prices have recovered from their historic plunge in March of this year, international benchmark Brent crude is still trading nearly 40% below pre-pandemic levels.

And the IMF doesn’t see oil prices staging a dramatic recovery anytime soon, predicting prices in the $40 and $50 range in 2021. That’s still half the $80 per barrel figure OPEC kingpin Saudi Arabia needs to balance its budget, according to the fund.

“The projections for oil prices are in the corridor between $40 to $45 for … early next year, and will be between $40 to $50” next year overall, Azour said. “It think what is going to be also important to watch is the recovery in demand. That proved to be an important factor in what we saw this year, in addition to the supply that could come from alternative energies.”

Daily Forecast

The IMF also stressed diversification and continued coronavirus safety measures as key to strengthening the region’s economies, with a focus on providing opportunities for its youth population.

The reality is, at this time, there is no sign of the hoped for recovery. No signs of the coronavirus cases topping out, and no signs of a vaccine. All of these factors add up to lower demand.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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