Crude Oil

Prices: The front-month futures price for Brent crude oil settled at $54.38 per barrel (b) on January 7, 2021, an increase of $6.96/b from December 1, 2020. The front-month futures price for West Texas Intermediate (WTI) crude oil for delivery at Cushing, Oklahoma, increased by $6.28/b during the same period, settling at $50.83/b on January 7 (Figure 1).

Crude oil prices rose steadily throughout December and the first week in January, with both Brent and WTI settling higher than $50/b and reaching their highest levels since February 2020. EIA attributes this upward price movement to both demand and supply-side factors. Expectations of economic recovery associated with the approval and production of a number of COVID-19 vaccines is perhaps the most significant demand-side factor in crude oil price changes. Vaccine efforts have contributed to a broad increase in prices across most asset classes and commodities, reflecting market expectations for economic growth. On the supply side, production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+) are expected to continue, suggesting that crude oil inventory draws are also likely to continue during the coming year. EIA forecasts that global inventories will continue to fall, drawing at a rate of 0.6 million barrels per day (b/d) in 2021. This upward price pressure was further magnified by the January 5 announcement by Saudi Arabia that it would unilaterally cut an additional 1.0 million b/d of crude oil production in February and March.