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Crude Oil Price Short-Term and Long-Term Predictions


16 March 2021

Over the years, crude oil has often been compared to gold, with some even referring to it as “black gold” due to its secure financial position. However, this changed altogether in 2020, with crude oil’s stability being completely undermined. In this oil price forecast, we will look at the history of crude oil, factors that have affected its price, and price predictions from experts.

What Is Crude Oil?

Crude oil is a source of fuel in liquid form; it can be found underground and is extracted by drilling. Oil has many uses, including plastic and petroleum production, transportation, and the generation of heat and electricity. 

Because of oil’s origins, it is considered to be a “fossil fuel.” Simply put, crude oil was created hundreds of millions of years ago when plankton and prehistoric algae settled at the bottom of the ocean. The organic matter was covered with mud and layers upon layers of sediment - and the resulting pressure heated the remains. Over the course of millions of years, the matter formed kerogen (a waxy substance), and then, after even more heat and pressure, it transformed into liquid oil. 

This process means that crude oil is a nonrenewable resource. When the world’s current supply of oil is used up, it would take millions of years for more oil to be created. 

A Closer Look at Crude Oil Usage

As we mentioned, crude oil has many uses, primarily for transportation. It is the base for jet fuel, gasoline, and diesel fuels. Furthermore, crude oil is the base for petroleum products - the byproducts of which include paraffin wax, tar, asphalt, and lubricating oils. Oil’s uses can even stretch as far as perfume, fertilizer, soap, vitamin capsules, and insecticides. 

While pretty much every country depends on oil, only a handful of countries produce it. The top 5 countries that produce the most oil are the United States (17.9%), Saudi Arabia (12.4%), Russia (12.1)%, Canada (5.9%), and Iraq (5%). 

The global consumption of oil has risen steadily year-to-year over the last 3 decades; the only decline was during the financial crisis of ‘08 and the pandemic crisis of 2020.

Crude Oil Types

There are two main types of crude oil: Brent and West Texas Intermediate (WTI). 

4 Factors Influencing Oil Price

Due to unexpected changes to the factors that affect oil prices, this commodity has become highly volatile. Later, we will take a look at how exactly crude oil’s price performed in 2020 - but, first, we’ll introduce four key factors that have had a significant impact on this black gold. 

So, how does this affect oil? All oil transactions are made in USD. Most oil-exporting countries maintain their currency’s value at a fixed exchange rate to USD; therefore, a 25% rise in the dollar’s value comes along with a 25% decline in oil prices. 

Crude Oil Price Performance in the Past 

Over the last decade, the price of crude oil has been especially volatile. Crude oil is one of the most scrutinized commodity prices; its cost influences all stages of production and, therefore, alters the price of end-products as well. Why has crude oil been so volatile? Oil’s inherent inelasticity in regards to short-term changes in supply and demand means that its prices are naturally erratic. What’s more, the economic growth in BRIC countries (like India and China) and the use of horizontal drilling and hydraulic fracturing in the US have caused further changes to supply and demand, thus contributing to the heightened price volatility since 2009. The chart below shows the historical fluctuations in oil’s price: 

Some historical world market oil events reflected in the chart include:

How Is Oil Doing Now?

2020 was a terrible year for crude oil, and we don’t say that lightly. The US’s assassination of Iran’s most powerful military commander, Qasem Soleimani, on January 3rd, 2020, led to heightened global tensions. Add COVID-19 to the mix, as well as the Saudi-Russia oil price war, and it’s not surprising that oil’s price shot down. 

What nobody was expecting, however, was for the price to reach -37.63. This occurred on April 20th, 2020, plunging crude oil’s price to the negatives for the first time in history. 

As the commodity plummeted amidst immense oversupply and a drop in demand, investors fled. Since then, however, crude oil has managed to recover its losses and reach price levels of late 2019. At the time of writing (2/23/2020), a barrel of WTI is trading at $61.49, while Brent Crude is at $66.37. 

Short-Term Crude Oil Price Prediction for 2021 

Want to know how Brent crude oil is anticipated to perform for the rest of 2021? This 2021 price prediction chart from LongForecast is quite reasonable: 

Month

Open

Low-High

Close

Mo,%

Total,%

Mar

66.79

66.76-68.80

67.78

1.5%

20.5%

Apr

67.78

67.78-73.06

71.98

6.2%

28.0%

May

71.98

71.98-77.59

76.44

6.2%

35.9%

Jun

76.44

76.44-82.40

81.18

6.2%

44.3%

Jul

81.18

75.01-81.18

76.15

-6.2%

35.4%

Aug

76.15

70.36-76.15

71.43

-6.2%

27.0%

Sep

71.43

71.43-76.89

75.75

6.0%

34.7%

Oct

75.75

75.75-79.02

77.85

2.8%

38.4%

Nov

77.85

77.85-83.92

82.68

6.2%

47.0%

Dec

82.68

82.68-89.13

87.81

6.2%

56.1%

Brent crude oil is anticipated to exit 2021 between $82.68 and $89.13. (Longforecast.com)

Crude Oil Price Forecast for 2022-2024

LongForecast has also published Brent crude oil predictions for 2022 - 2024. After 2024, however, month-to-month predictions are too speculative to provide, so we shall give more general insights for later years. 

2022

Jan

87.81

87.81-92.96

91.59

4.3%

62.8%

Feb

91.59

84.62-91.59

85.91

-6.2%

52.7%

Mar

85.91

79.37-85.91

80.58

-6.2%

43.3%

Apr

80.58

74.45-80.58

75.58

-6.2%

34.4%

May

75.58

75.58-81.14

79.94

5.8%

42.1%

Jun

79.94

79.94-84.10

82.86

3.7%

47.3%

Jul

82.86

80.88-83.34

82.11

-0.9%

46.0%

Aug

82.11

81.35-83.83

82.59

0.6%

46.8%

Sep

82.59

80.52-82.98

81.75

-1.0%

45.3%

Oct

81.75

75.53-81.75

76.68

-6.2%

36.3%

Nov

76.68

76.45-78.77

77.61

1.2%

38.0%

Dec

77.61

71.71-77.61

72.80

-6.2%

29.4%

Brent crude oil is anticipated to enter 2022 between $87.81 and $92.96. It may exit 2022 between $71.71 and $77.61. (Longforecast.com)

2023

Month

Open

Low-High

Close

Mo,%

Total,%

Jan

72.80

72.80-76.90

75.76

4.1%

34.7%

Feb

75.76

75.76-81.67

80.46

6.2%

43.0%

Mar

80.46

80.46-84.41

83.16

3.4%

47.8%

Apr

83.16

83.16-89.64

88.32

6.2%

57.0%

May

88.32

81.60-88.32

82.84

-6.2%

47.3%

Jun

82.84

76.53-82.84

77.70

-6.2%

38.1%

Jul

77.70

71.79-77.70

72.88

-6.2%

29.6%

Aug

72.88

72.88-78.56

77.40

6.2%

37.6%

Sep

77.40

75.20-77.50

76.35

-1.4%

35.7%

Oct

76.35

76.35-82.30

81.08

6.2%

44.1%

Nov

81.08

81.08-86.48

85.20

5.1%

51.5%

Dec

85.20

85.20-89.29

87.97

3.3%

56.4%

Brent crude oil is anticipated to enter 2023 between $72.80 and $76.90. It may exit 2023 between $85.20 and $89.29. (Longforecast.com)

2024

Jan

87.97

84.34-87.97

85.62

-2.7%

52.2%

Feb

85.62

85.62-90.44

89.10

4.1%

58.4%

Mar

89.10

89.10-93.99

92.60

3.9%

64.6%

Apr

92.60

92.60-99.53

98.06

5.9%

74.3%

May

98.06

98.06-105.70

104.14

6.2%

85.1%

Jun

104.14

104.14-112.26

110.60

6.2%

96.6%

Jul

110.60

110.60-115.03

113.33

2.5%

101.5%

Aug

113.33

113.33-121.42

119.63

5.6%

112.7%

Sep

119.63

114.53-119.63

116.27

-2.8%

106.7%

Oct

116.27

111.63-116.27

113.33

-2.5%

101.5%

Nov

113.33

107.36-113.33

108.99

-3.8%

93.8%

Dec

108.99

101.99-108.99

103.54

-5.0%

84.1%

Brent crude oil is anticipated to enter 2024 between $84.34 and $87.97. It may exit 2024 between $101.99 and $108.99. (Longforecast.com)

Looking to the Future: Oil Price Forecasts for 2025 - 2050 

Developing an oil price forecast is so much more complicated than forecasting currency pairs or crypto - because it depends so heavily upon environmental changes in addition to the global economy. Oil is a limited resource, so we will eventually hit a plateau in production - and, afterwards, this commodity will become scarcer and scarcer. This implies that the price will skyrocket. 

However, we must not ignore the push for renewable resources. If solar energy becomes the new normal, global oil markets will instead plummet. This is why it is futile to provide a price prediction for crude oil set decades in the future. 

Wars, climate change, and government policies will all have influence over oil’s price - for better or for worse. 

Technical Analysis of Oil Price

When determining whether to buy or sell oil, it is crucial to create a technical analysis. We will show you the top technical indicators to include in a crude oil analysis, presented alongside an example. First, you need to determine whether you want to deal with Brent, WTI, or both. They trade differently, so they would both have their own technical analysis. The chart below compares both Brent and WTI.

Next, choose the timeline that you want to look at. While it is possible to set up technical analysis for timelines as short as 30 minutes, it can also be useful to look at the bigger picture, such as in weekly increments. 

You will also want to decide which technical indicators to use. Some useful ones include: 

  • Simple Moving Average (adds recent prices and divides it by the number of days in the time period) 
  • Bollinger Bands (shows two price channels (or bands) above and below a centerline)
  • Relative Strength Index (measures the change and speed of recent price movements)

Based on the weekly trend, the moving average and technical indicators indicate a strong buy. 

Long-Term Oil Price Predictions by Experts 

We have gathered several long-term price predictions from experts in the field. 

  • EIA: The US Energy Information Administration (EIA) is one of the most reputable sources of oil price predictions. According to their short-term energyoutlook, crude oil prices will average around $56 per barrel in Q1 of 2021 and hold constant around $52 per barrel for the rest of the year. In their oil price prediction, EIA expects that the rising oil supply will hinder the pace of global oil inventory withdrawals, thus limiting upward price pressures. Therefore, they foresee Brent prices hovering around $55 per barrel in 2022. Now, for their long-term opinion: according to the EIA, the price of crude oil may follow three paths: the reference path, the high price path, and the low price path. In a best-case scenario, crude oil’s price could soar to $175+ by 2050. In a worst-case scenario, it could stay under $50 for the next several decades. 
  • Kimberly Amadeo - The Balance: Amadeo is the President of World Money Watch; she has over 20 years of experience producing economic analysis. Amadeo predicts that Brent’s price will rise to $89 per barrel by 2030 and then $132 per barrel in 2040. Her reasoning? By then, all the cheap oil sources will have been used up, making oil extraction more expensive. 
  • McKinsey: In 2019, McKinsey released a Global Oil Supply and Demand Outlook, in which they predicted three paths for oil’s future prices. While their recession path was not as drastically negative as what really happened in 2020, oil prices now match up with McKinsey’s 2021 Base Case. McKinsey foresaw the stagnation, oversupply, and OPEC issues that have plagued oil’s prices in 2020 and 2021. So what do they see for crude oil’s price in the long-term? 

They have several different long-term predictions, in fact, depending on which short term scenarios are not remedied. In the best-case scenario, in 2035, there will be strong demand growth, and barrels will be worth over $100. If stagnation and oversupply remain, prices will be around $80-90 per barrel. If OPEC remains in control of the market balance, the price per barrel should be between $65- $75. If there is long-term oversupply, the price per barrel would instead be $50 - $60. 

What to Do With Crude Oil - Trade or Invest?

Just as with any other market, there is no guarantee of profit when you invest in oil. Because of its often-fluctuating prices, crude oil is a very risky asset. Therefore, before making an investment decision, be sure to check out the latest expert opinions, market trends, and technical analysis. To build a winning trading strategy, it is crucial to inform yourself on economic goings-on as deeply as possible. 

But what if you aren’t ready to make a long-term investment commitment? By trading CFDs, you can profit from the crude oil market’s volatility. With the Libertex Trading Platform, you can get started trading WTI and Brent Crude Oil CFDs. 

Why to trade with Libertex?

  • access to a demo account free of charge
  • technical assistance to the operator 5 days a week, from 8 a.m. till 8 p.m. (Central European Standard Time)
  • leverage of up to 1:600 for professional сlients
  • operate on a platform for any device: Libertex and Metatrader

FAQ

Let’s finalize this article with commonly asked questions. 

Are Oil Prices Expected to Rise in 2021?

Yes, oil prices are anticipated to continue to rise in 2021. 

Will Oil Price Recover in 2021?

Oil prices are anticipated to make a full recovery to pre-pandemic levels by the end of 2021. 

Will Oil Prices Ever Recover?

Not only will oil prices recover, but they may also reach a new all-time high by 2050 - depending on which global market scenarios play out. 

Will Oil Go Up to $100 a Barrel?

Yes, this is certainly possible. In fact, the EIA forecasts that Brent oil could reach as high as $175 per barrel by 2050 - and economic conditions might drive the price even higher. $100/barrel is not unprecedented; in July of 2018, prices reached $133 per barrel. In December of 2018, prices dropped down to $40 per barrel (lower than its current price) and then rose to $124 per barrel in 2011. 

So, large fluctuations in price are possible - and we may even see price upwards of $200 per barrel over the next couple of decades. However, you must keep in mind that extended high prices will cause people to change their buying habits, resulting in “demand destruction.”

Can Oil Go Up?

Political unrest, as well as growing scarcity, could cause the price of oil to go up. 

How Can I Buy a Barrel of Oil?

While you can buy a barrel of oil, you'd need to go to the spot market, which is for physical goods that are bought, sold, and traded in real time.

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