After a black year, everything points to a clear recovery in fuel consumption next year.

It remains to be seen whether OPEC and Russia can agree to continue to curb their production.

And if U.S. shale will move forward again if the price of a barrel rises.

2021 will be the year of the rebound for oil markets. After a historic 2020, marked by the collapse of the price of a barrel, most indicators are green and argue for a rise in prices. Fuel consumption has not returned to normal in North America and Europe, but it is no longer very far from it, despite the reconfinement decided in most Western countries.

Sales of gasoline and diesel have returned to their pre-crisis levels in China and Japan, respectively the second and fourth largest consumers of black gold. In India, Indian Oil announces that its refineries are operating at full capacity. And the record surpluses that have accumulated in tanks around the world since spring are finally receding. "Inventories are falling," MUFG analysts said.

Faster than GDP

The 2020 crisis was exceptional for the oil market because it penalized mobility, and therefore fuels. Oil consumption has fallen 1.6 times more than GDP, Citi experts calculated, while the ratio of crude demand to the economy's decline is historically 0.4 on average. "It is therefore reasonable to expect that demand will recover faster than GDP in 2021, as mobility improves," they write.

Some experts are particularly optimistic. For MUFG analysts, global consumption could return to 100 million barrels per day, the pre-pandemic level, as early as next summer. The International Energy Agency is more cautious. It forecasts an average consumption of less than 97 million barrels per day in 2021. "Demand will remain low for longer than expected," she said. It will still be significantly more than the 91 million in 2020.

Many experts predict a rise in prices in 2021 anyway. MUFG expects brent to average $58 in 2021, up from $38 in 2020, and $64 at the end of next year. RBC Capital Markets predicts an average price per barrel of $51.50 next year, not far from its current level ($51 on December 24).

The price of a barrel is all the more difficult to predict as it will also depend on the evolution of production. And the latter, as always, is far from being determined. Certainly, the OPEC countries and their ten allies led by Russia continue to voluntarily limit their exports in order to support prices. Their agreement, in theory, will remain in force throughout 2021, with a gradual relaxation of quotas. But will this agreement hold?

The year 2020 has been the scene of growing tensions within the cartel and its Russian ally. The price war between Moscow and Riyadh in March left its mark, and new fault lines emerged in late November at the last OPEC summit. The United Arab Emirates, traditionally allied with Saudi Arabia, has questioned quotas, saying it wants to increase production.

For Citi, these dissensions are explained by a growing concern about the energy transition, which weighs on oil demand in the medium term. More and more oil states want to maximize their production now, for fear that their assets will end up "stranded" sooner than expected - stranded assets are the assets that could suffer depreciations due to the ecological transition. By announcing a halving of its production by 2030, the UAE would reduce the lifespan of its huge reserves from ninety years to fifty years.

The shale issue

Markets are also looking across the Atlantic, among U.S. shale oil producers. The year 2020 saw U.S. production decline for the first time since 2016. Faced with falling prices, many shale oil operators have stopped investing to drill new wells. This financial discipline is new: for years, the shareholders of American companies have accepted that operators are in the red, betting on future growth.

This new trend limits the recovery of U.S. production, but for how long? Citi analysts believe it will rise as soon as global prices start to rise again. Beyond $55 per Brent price, the battle for market share between OPEC and US shale would resume. "Shale is a monster that can be slowed down, but not killed," writes Bjornar Tonhaugen of Rystad Energy.