2021 Outlook: Worst seems to be over for Saudi Arabia

2021 Outlook: Worst seems to be over for Saudi Arabia

The outlook for the oil sector is mixed. The US Energy Information Administration (EIA) in its December 2020 report estimated monthly Brent crude oil prices will rise to an average of $49 per barrel in 2021, $2 higher than last month's estimate. For the fourth quarter of 2020, EIA expects an average price of $43 per barrel.Additionally, last week Saudi Arabia and its OPEC+ partners agreed to increase production by 500,000 barrels per day beginning January. This will bring the total production cuts at the start of 2021 to 7.2 million bpd.However, the easing of production restraints could put further downward pressure on prices if there is no recovery in global demand. According to the IMF estimates, Saudi Arabia would need oil to trade at $66 to balance its budget in 2021.In the non-oil sector, private sector business activity has expanded as the lockdown restrictions eased. According to IHS Markit, PMI rose sharply from 51.0 in October to 54.7 in November, “to signal the strongest improvement in business conditions since January.”David Owen, economist at HIS Markit, said: “As a result, there was evidence of firms raising investment in anticipation of an uplift in 2021 should the pandemic come to an