Get set for more volatility in oil prices in '21

Oil prices have sharply rebounded in a volatile year like no other. But the outlook isn’t all that rosy for 2021.

Back in April, the COVID-19 pandemic and a price war between Saudi Arabia and Russia torpedoed U.S. crude prices into negative territory and drove Brent crude to below $20 per barrel.

Brent has since bounced back to $51. But new lockdowns and a phased rollout of vaccines could keep a lid on demand in 2021 and possibly beyond. What’s more, climate change concerns could keep fossil-fuel demand soft even after the pandemic is over. Some big oil companies say global oil demand may have peaked in 2019.

The U.S. Energy Information Administration says crude and liquid fuel consumption dropped 9% in 2020 from last year as governments imposed lockdowns to curb the spread of the coronavirus.

Get set for more volatility. The next several months are likely to be rocky as investors weigh tepid demand against another potential spike in oil supply from producers. A crude oil volatility index from the Cboe is trading around 60% higher than this time a year ago.

Video Transcript

REPORTER: Oil prices have sharply rebounded in a volatile year like no other. But the outlook isn't all that rosy for 2021. Back in April, the COVID-19 pandemic and a price war between Saudi Arabia and Russia torpedoed US crude prices into negative territory and drove Brent crude to below $20 per barrel. Brent has since bounced back to $51. But new lockdowns and a phased rollout of vaccines could keep a lid on demand in 2021 and possibly beyond.

What's more, climate change concerns could keep fossil fuel demand soft even after the pandemic is over. Some big oil companies say global oil demand may have peaked in 2019. The US Energy information Administration says crude and liquid fuel consumption dropped 9% in 2020 from last year as governments imposed lockdowns to curb the spread of the coronavirus.

Get set for more volatility, the next several months are likely to be rocky as investors weigh tepid demand against another potential spike in oil supply from producers. A crude oil volatility index from the CBOE is trading around 60% higher than this time a year ago.