Oil prices too have been range-bound without any major surge in prices as expected earlier. This is due to the fact that the OPEC + had decided that they may increase production gradually by about 2 million barrels per day. The prices have found a base at the US$ 60-63 levels. What is likely to prevent the prices from rising is the rapid resurgence of the pandemic in the recent weeks in most parts of Europe and also in large importers of oil like India. The expectation is that oil imports by some of the affected countries will fall again as it happened in the first wave of the pandemic and could lead to destruction of demand. But, in sharp contrast to this thesis, many oil producers expect demand to rise in the coming summer as they expect normal activity around holidays to resume leading to a surge in consumption. The aggressive preventive measures including vaccination drive especially in the US by the new administration is pointed out as a factor that may aid in the establishment of normalcy soon. The services PMI in the US indicates a vibrant services sector which has more or less weathered the adverse impact of the pandemic. Brent may continue to be range-bound for the time being though the trajectory for 2021 will be determined by the interplay of multiple factors like the revival in consumption of oil in the major economies, the changes in the consumption patterns, if any, in the post-pandemic period, the direction of the US Dollar, and finally, the strength of the economic rebound against the resurgence in the pandemic.
