Varcoe: Yergin looks at historic year for oil, profound shift coming for energy complex

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Q: Where do you see oil prices headed in 2021?

A: The oil price has been stuck for some time now in what I’ve just started to call virus alley. At one end of the alley is the virus, and the other end is the vaccine. As we get closer to the vaccine, the markets are sort of anticipating the world after COVID, which will be sometime in late spring or summer, probably.

Then, it’s reasonable to expect (oil) to be in a $50 to $60 world for Brent, rather than where prices have been. Some people think higher than that. But then so much goes back to what happens with GDP.

Of course, even with recovery, there is still going to be an overhang of barrels (that are) off the market … if the Biden administration starts talking to Iran about restoring the nuclear deal, the flip side of that is more Iranian oil coming on to the market.

Q: When will oil demand return to 2019 levels?

A: The end of 2021, 2022.

Q: There is talk about under-investment in the oil industry. Do you see that leading to another period of much higher oil prices or is the era of high oil prices over?

A: In watching the oil market, you learn to never say never because one surprise follows another … With that said, you look at the degree of budget cuts, the caution of companies…. I could see the market tightening, but what I do also see is a big overhang of additional supply. There’s a lot of oil sitting on the bench right now…

I could be wrong, but I don’t see the circumstances (of high oil prices) unless something very dramatic happens, in which you would have a crunch. But I could surely see markets tightening a few years from now.

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