Global crude oil prices rose in 2021 amid loosening pandemic-related restrictions
As the economy restructured itself in the wake of COVID-19’s initial stages, vaccination rates rose, and pandemic restrictions reverted, global crude oil prices rebounded in 2021, spurred by petroleum demand rising faster than supply.
The slower increase in production is mainly attributable to OPEC+, according to the U.S. Energy Information Administration (EIA), which cut crude oil production beginning in late 2020. Associated nations continued limiting production increases throughout 2021 to drive prices higher.
The spot price of Brent crude oil, the global benchmark, rose from $50 per barrel to a high of $86 per barrel in late October. While this declined in the final weeks of 2021, it maintained an annual average of $71 per barrel – the highest prices in the last three years. Another benchmark, West Texas Intermediate crude oil, followed similar patents to an average of just $3 per barrel less than Brent.
In the United States, EIA’s December 2021 Short-Term Energy Outlook estimated that U.S. crude oil production for all of 2021 decreased by 0.1 million barrels per day compared to 2020. Compared to 2019, this represented a 1.1 million barrel per day drop. Unlike OPEC+, the source of U.S. problems was cold weather in February and hurricanes in August, along with declining investments among oil producers. The same report estimated that petroleum inventories decreased by 469 million barrels globally in 2021, which could be the largest annual inventory withdrawal since 2007.
The largest inventory draw for the year came in February when Saudi Arabia announced a straight 1 million barrels per day cut to its production while the United States was hit by severe cold weather and resulting well freeze-offs. During this period, the United States experienced a 1.3 million barrels per day decline in its crude oil production. June was also a heavy withdrawal month.
