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2021 Oil and Gas Outlook

Posted December 31, 2020 in Articles

It’s time for our annual look at the forecast for the oil and gas industry for the upcoming year. Here is what the U.S. Energy Information Administration (EIA) and other forecasters are predicting for 2021:

The Oil and Gas Industry Will Continue to Feel the Effects of the COVID-19 Pandemic in 2021

The novel coronavirus (COVID-19) pandemic has caused significant volatility in the oil and gas markets, and the EIA expects the pandemic’s effects to continue well into 2021. According to the EIA, while the announcement of the release of the COVID-19 vaccine in November 2020 caused a slight increase in the price of crude, the agency’s forecast, “remains subject to heightened levels of uncertainty because responses to COVID-19 continue to evolve. Reduced economic activity related to the COVID-19 pandemic has caused changes in energy demand and supply patterns in 2020 and will continue to affect these patterns in the future.”

Overall, however, the EIA expects a slight uptick in the oil and gas markets through 2021. For example, while Brent crude averaged $43 per barrel in 2020, the EIA is forecasting an average price of $49 per barrel in 2021. Of course, this is still considerably lower than the 2019 average of just over $64 per barrel.

On the production side, the EIA is forecasting a similar modest increase, which it agency believes will be matched by a corresponding increase in worldwide consumption.

An analysis published by Bloomberg offers a similarly reserved forecast. For example, with regard to oil and gas pipeline owners and operators, Bloomberg’s analysis cautions that companies may need to, “adjust to a no-growth environment for the foreseeable future.” The analysis also notes that, “[a] tougher regulatory environment will favor incumbents,” in 2021.

With regard to employment in the oil and gas industry, Deloitte notes that, “[m]ass layoffs and heightened cyclicality in employment continue to challenge the industry’s reputation as a reliable employer.” The Big Four firm reports that U.S. oil and gas companies laid off approximately 14 percent of their permanent workforces in 2020, and it is forecasting that, “70% of jobs lost during the pandemic may not come back by the end of 2021.”

Goldman Sachs Expects Oil and Gas to “Gain Momentum” in 2021

In a notable departure from the EIA and other major analysts, Market Insider reported in September that Goldman Sachs, “expects the oil market to gain momentum in 2021.” In contrast to the EIA, for example, the firm is forecasting Brent crude to average $58 per barrel in 2021, following a rally to $65 per barrel in the third quarter. According to Market Insider, Goldman Sachs’ more-favorable outlook is buoyed by expectations regarding the worldwide rollout of the COVID-19 vaccine.

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Mithras Investments is a full-service consulting firm based in the United States that serves companies in the oil, gas and alternative energy industries nationwide. If you have questions about the future or need help making strategic decisions about your company’s operations in 2021, we encourage you to call 305-517-7911 or contact us online to schedule a consultation.

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