Commodity Outlook: Oil prices to average $64 p/b in 2021

ICE Brent crude oil front-month prices averaged $65.7 per barrel (p/b) in March 2021, constituting an increase of 5.5% from $62.3 p/b in February 2021 and a rise of 95% from $33.7 p/b in March 2020. The recovery in oil prices was mainly due to improving demand prospects amid the rollout of the COVID-19 vaccine world-wide, as well as to supply discipline from the recurrent OPEC and non-OPEC output cuts, and to lower oil production in the U.S. However, oil prices remained capped at about $64 p/b since March 18, due to new lockdown measures in several European countries and to a slowdown in vaccination programs amid distribution issues and concerns over potential side effects of the vaccine, which raised uncertainties about oil demand prospects. In parallel, the disruption of activity at the Suez Canal between March 23 and 29, one of the world’s busiest shipping channels for oil and refined fuels, raised concerns about a tightening of oil supply, which supported oil prices. In parallel, Fitch Solutions forecast Brent oil prices at $64 p/b in 2021, reflecting the current recovery trend in the oil market. It considered that the decisions of the OPEC and non-OPEC alliance on output will significantly influence near-term prices, and considered that the outlook on oil demand for the second half of 2021 is positive, amid wider vaccine rollout globally and the enactment of a significant stimulus package in the U.S.

ME&A’s oil demand to expand by 4.4% in 2021
Consumption of crude oil in the Middle East & Africa is expected to average 12.2 million barrels per day (b/d) in 2021, which would constitute an increase of 4.4% from 11.69 million b/d in 2020.
The region’s demand for oil would represent 23.6% of demand in non-OECD countries and 12.7% of global consumption this year.

Libya’s oil and gas receipts at $2.6bn in first two months of 2021
Libya’s oil and gas revenues totaled $2.6bn in the first two months of 2021, constituting an increase of 13.8% from $2.3bn in the same period of 2020. Oil and gas receipts amounted to $1.2bn in February 2021, constituting a decrease of 12.3% from $1.4bn in the preceding month and a surge of 122.4% from $555.5m in February 2020. The year-on-year increase in Libya’s hydrocarbon receipts was mainly due to the lifting of the blockades of several ports and fields in September 2020, as well as to the recovery in oil prices.

Egypt’s natural gas output to reach 7.2 billion cubic feet per day in FY2021/22
Egypt’s Ministry of Petroleum and Mineral Resources indicated that the country plans to expand its natural gas production to 7.2 billion cubic feet per day in the fiscal year that ends in June 2022. In comparison, Egypt’s natural gas output averaged about 6.6 billion cubic feet per day in 2020. In parallel, the Egyptian Natural Gas Holding Company signed nine agreements to drill 18 exploration wells, with total investments of $981m. Egypt became self-sufficient in terms of gas production at end-September 2018.

Global steel output up 7% in first two months of 2021
Global steel production reached 315 million tons in the first two months of 2021, and increased by 6.6% from about 295 million tons in the same period of 2020. Production in China totaled 175 million tons and accounted for 55.6% of global output in the covered period. India followed with 19.4 million tons (6.2%), then Japan with 15.4 million tons (4.9%), the U.S. with 13.3 million tons (4.2%), Russia with 12.1 million tons (3.8%), and South Korea with 11.5 million tons (3.7%). 

Saudi Arabia’s oil exports down 4% in January 2021
Total oil exports from Saudi Arabia, which include crude oil and other oil products, amounted to 7.8 million barrels per day (b/d) in January 2021, and increased by 0.6% from 7.7 million b/d in December and a decrease of 3.6% from 8 million b/d in January 2020. Further, Saudi Arabia’s oil export receipts reached $14.1bn in January 2021, expanding by 14.3% from $12.4bn in December 2020 and declining by 20.5% from $17.8bn in January 2020.

Egypt’s LNG exports at 1.6 billion cubic meters in fourth quarter of 2020
Egypt exported 17 shipments of liquefied natural gas (LNG) between October and December last year, up from six shipments in the first quarter of 2020. As such, the country’s LNG exports reached 1.6 billion cubic meters of equivalent gas in the fourth quarter of 2020. Also, the exports of LNG reached eight to nine shipments per month so far in 2021. In parallel, the Cabinet expected the resumption of activity at the Damietta gas liquefaction plant to expand Egypt’s export capacity to 12.5 million tons.

Base Metals: Copper prices to average $7,200 per ton in 2021
LME copper cash prices averaged $8,490 per ton in the first quarter of 2021, and increased by 50.5% from an average of $5,640 a ton in the same quarter of 2020. They reached $9,456 per ton on February 25, 2021, their highest level since August 2011, driven mainly by concerns about supply tightness and by strong demand for the metal. Further, copper prices moderated to an average of $8,988 per ton in March 2021, largely due to a stronger US dollar and the resurgence in the number of coronavirus infections in Europe, which weighed on investors’ sentiment. They closed at $8,788 a ton on March 31. However, ongoing supply concerns and prospects of higher demand for copper continue to support prices. In addition, Fitch Ratings revised upwards its projections
for copper prices from an average of $6,000 per ton to an average of $7,200 a ton for 2021, in order to reflect China’s strategic purchases of the metal and supply risks this year. In parallel, the latest available figures show that global demand for refined copper was 25 million tons in 2020, up by 2.2% from 2019, as the 13% growth in Chinese demand offset the 10% decrease in demand
from the rest of the world. Also, global refined copper production grew by 1.5% to 24.4 million tons last year, as higher output from Chile, the Democratic Republic of the Congo, Japan and Zambia
was partially offset by lower production in the U.S., and India.

Precious Metals: Palladium prices up 5.5% in first quarter of 2021
Palladium prices averaged $2404 per troy ounce in the first quarter of 2021, constituting an increase of 5.5% from an average of $2,279 an ounce in the same period of 2020, and reached an 11-
month high of $2,678 per ounce on March 18 of this year. Robust demand for palladium from the automotive sector, which accounts for 80% of the metal’s global demand, was the main driver
of the rise in the metal’s price. Also, strong demand prospects amid expectations of supply disruptions from Norilsk Nickel, the world’s largest palladium producer, supported the metal’s price.
In parallel, Citi Research revised its forecast for palladium prices, as it anticipated a larger deficit in the palladium market. It projected total refined supply of palladium at 6.75 million ounces in
2021 relative to a previous forecast of 7.32 million ounces, as it expected output in Russia to decline. It projected demand for the metal in 2021 at 7.74 million ounces, unchanged from 2020, and
for investment into palladium-backed exchange-traded funds to be equivalent to 28,000 ounces this year. As such, it anticipated the surplus in the palladium market at about one million ounces
in 2021 compared to a previous forecast of 450,000 ounces. As a result, Citi revised upwards its forecast for palladium prices from $2,500 per ounce to $3,000 an ounce for the next three month.

Base Metals: Aluminum prices to average $2,300 per ton in near term
The LME cash price of aluminum averaged $2,040 per ton in the first two months of 2021 and increased by 17.6% from an average of $1,734 a ton in the same period last year, with prices reaching
$2,237 per ton on February 25, their highest level since June 2018. Improved prospects of a global economic recovery, investors’ optimism about the ratification of the economic stimulus
package in the U.S., and the surge in the purchase of metals as a hedge against the global rise in inflation, contributed to the increase in aluminum prices in the covered period. Also, aluminum
prices averaged $2,167 per ton between March 1 and March 17, and closed at $2,194 a ton on March 17, 2021. Concerns about supply tightness amid production cuts in China, the world’s
largest producer of the metal, kept prices elevated in March. The Chinese city of Baotou in Inner Mongolia, which is a major aluminum producing hub, announced shutdowns and production curtailment at industries that consume a large amount of energy in order to meet its energy efficiency targets for the first quarter of the year. As a result, Citi Research raised its price forecast for
aluminum for the coming three months from $2,200 per ton to $2,300 a ton. It said that the supply cuts in Inner Mongolia led to tightness in the Chinese aluminum physical market, given the seasonally growing demand for the metal in the country.

Precious Metals: Platinum prices up 23% in year to-March 17 period
Platinum prices averaged $1,155 per troy ounce in the year-toMarch 17, 2021 period, constituting an increase of 22.6% from an average of $942 an ounce in the same period of 2020, with
prices reaching a six-year high of $1,294 per ounce on February 19 of this year. A weaker dollar, higher inflation rates, and declining real interest rates globally drove the rise in the metal’s price
and reinforced the appeal of platinum as a hedge against inflationary pressures. Also, expectations that the anticipated economic recovery would boost demand for platinum in industrial
and global automotive production supported the metal’s price. In parallel, Citi Research projected total refined supply of platinum at 6.4 million ounces in 2021 relative to a previous forecast of
6.5 million ounces as it expected lower output from Russia. Also, it forecast demand for the metal to remain unchanged at nearly 5.6 million ounces and for investment into platinum-backed exchange-traded funds to total 476,000 ounces this year. As such, it expected the surplus in the platinum market at 269,000 ounces in 2021 relative to a previous forecast of 418,000 ounces. As a result, Citi revised its forecast for platinum prices from $1,200 per ounce to $1,300 an ounce for the next three month.