Last week, Brent crude traded on quite a high level of $57.4 per barrel. Thus, oil prices hit the highest reading since late January 2020. Then, the coronavirus outbreak took place only in China. Such a jump in oil prices was triggered by Saudi Arabia's decision to cut its oil production by 1 million barrels a day. Moreover, OPEC+ immediate reaction to signs of lower demand contributed to higher prices. At the same time, investors' optimism also boosted oil.

However, yesterday, oil prices dropped to $55 per barrel. Today, they are still trading near this level.

Oil prices also depend on the US dollar price. They are also shaped by concerns about mass vaccination. This process is likely to take much more time than expected. This, in turn, will surely influence the pace of the global economic recovery. Of course, the industrial sector was hit less than the services sector. Nevertheless, higher oil demand requires revival of business activity in all spheres.

Recently, there was news about a new outbreak of COVID-19 in the northeastern regions of China. Thus, China has been daily recording more than 100 new virus cases for six days in a row. It is highly possible that the Chinese government will impose tough restrictive measures ahead of the New Year celebration.

Besides, this week, the US will disclose its API and EIA reports on oil reserves. If the data shows a rise in oil stockpiles, demand for oil will fall even more.

Moreover, the global number of new virus cases is constantly advancing. This is causing risks of tougher containment measures in most countries. All this has a negative influence on the market. Moreover, the current situation is preventing traders from larger long positions.

A jump in the US dollar against most major currencies has a downward pressure on oil.

According to the latest forecast provided by OPEC+ experts, oil consumption may advance to 95.9 million barrels a day from 90 million barrels a day this year. In other words, oil demand will hardly reach its pre-crisis level. Emerging countries, including China, will show higher consumption than other countries. Notably, import of crude oil to China rose to 7.3% in 2020. Today, China is the second largest consumer of oil in the world.

At the same time, analysts at JP Morgan and ANZ foresee a rise in oil prices to $60 per barrel in the second quarter of 2021. The market is heading for an annual deficit for the first time since 2017. If OPEC+ countries do not increase oil production, prices for it will jump to $80 per barrel. According to experts at JP Morgan, amid the reduction of energy reserves, the discrepancy between supply and demand will increase in the 2 or 3 quarter of this year. Analysts believe that oil consumption will reach its pre-crisis levels only in the first half of 2022.

Experts at ANZ, the major bank of Australia, made a different forecast regarding oil prices. Thus, Brent will cost about $58 in the next quarter, and in the second half of this year, the quotes will reach $60 per barrel. At the same time, economists note that demand for oil in the European region will significantly decrease. In the UK, it will drop by 42%. It is expected that in the first quarter, the reduction in global reserves will rise to 1.1 million barrels per day. However, it is possible that there will be a decrease in demand in the short term.

Oil prices are likely to surge in the second quarter of 2021.