December 18, 2020/Cordros Report
The Credit crisis of 1772; the Great Depression of 1929–39; the 1973 Oil crisis; the Asian Financial crisis of 1997; the Global Financial crisis of 2007–08. None has originated from a biological factor. 2020 brought a completely different twist. The year featured unprecedented shutdowns of economic activity due to a pandemic that overwhelmed the health care systems of many advanced economies. A fusion of massive monetary and fiscal stimulus packages, the historic OPEC+ oil production cuts, and a vote for new leadership in the US also characterised the year. As 2020 draws to a close, it is shaping up to be among the worst years for the global economy in more than 70 years.
In our 2020 Mid-Year outlook, we aligned with the view that without a vaccine, it was unlikely that economic activities would pick up pace anytime soon. Looking ahead now, we do see some silver linings. Breakthroughs on Covid-19 vaccines are being announced each week, and following encouraging early efficacy data, the hope is that most economies can return to a new normal following a widespread rollout of the vaccine in Q2-2021. Though challenges remain, we think the global recovery is sustainable, synchronous and supported by policy. The preceding, in our view, should culminate in the V-shaped recovery, which began in May, being sustained, and leading to 5.2% global GDP growth in 2021, according to IMF estimates.
On crude oil, our views on a rebound on global demand, as stated in our 2020 Mid-Year Outlook, played out in H2, with the resurgence of COVID-19 in Europe and the US leading to a slightly larger decline in global demand for the year. We expect the recovery in demand to continue, supported by the expansion in global growth. However, we still maintain the view that demand will likely not return to pre-COVID-19 levels before the end of 2021, especially as we expect a protracted vaccine rollout. On a balance of factors, we forecast Brent crude price will average between USD45.00 and USD50.00/bbl in 2021. This forecast is a slight increase from a projected USD42.00/bbl for 2020E but still significantly lower than the 2019 level of USD64.16/bbl.
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