Crude oil price is expected to average at $41 per barrel this year.

This is the latest revision of the price of the commodity from the earlier forecast of $35 by Fitch Solutions, the research arm of Fitch Ratings.

The forecast is however far lower than the projected $62 per barrel by the government. 

Fitch Solutions says the price review comes despite a better-than-expected year-to-date performance due to decisive production cuts by Organization of the Petroleum Exporting Countries (OPEC).

“The price reduction comes despite a better-than-expected year-to-date performance due to decisive production cuts by OPEC+, loosened lockdown measures and an economic recovery that has led us to increase our 2020 assumption to US$41 per barrel”, it said.

Fitch Solutions continued saying it has reduced both its 2022 and long-term price assumptions for Brent and West Texas Intermediate oil to reflect large underutilised production capacities, the extended period of high oil inventory caused by the coronavirus pandemic, falling upstream unit costs and the long-term energy transition.

“The price reduction comes despite a better-than-expected year-to-date performance due to decisive production cuts by OPEC+, loosened lockdown measures and an economic recovery that has led us to increase our 2020 assumption to $41 per barrel”, it pointed out.

Many countries have eased national pandemic-related lockdown measures despite the increasing number of new coronavirus cases in some countries, adding “we do not assume a second round of strict lockdowns globally, and therefore we envisage an oil demand recovery that continues in 2021.”

A sharp demand drop in the second quarter of 2020 was partially offset by OPEC+ production cuts.

The initial headline cut of 9.7 million barrels a day (mmb/d) in May and June 2020 was extended to July.

In August, it was reduced to 7.7 mmb/d,  as planned. The cuts are planned to be further be reduced to 5.8 mmb/d between January 2021 and April 2022.

2019 average oil price

 The price of Brent crude oil, averaged $64 per barrel in 2019, $7 per barrel lower than its 2018 average.