With the brent crude oil price continuing to rise in November, following reports of a second highly effective Covid-19 vaccine nearing emergency approval in the coming weeks, financial risk management, solutions and insights company Fitch Solutions Country Risk and Industry Research (Fitch Solutions) expects a sharper recovery in oil demand in 2021.

This is according to the company’s weekly Global Commodities Strategy report for, among others, oil and precious metals.

The report finds that petroleum policy coordinator, the Organisation of the Petroleum Exporting Countries+, or Opec+, appears to be settling on the short-term extension of production cuts at current levels.

As such, Fitch Solutions expects the building of optimism for improved demand, and tighter control on supply, in 2021, to keep the market in undersupply, which is helping to support price gains.

However, Fitch Solutions also notes that the reinstitution of lockdown measures in key markets in Europe and the US may result in prices moderating as a result of lower fuel consumption and economic activity to close this year.

“We maintain a bullish view into 2021, based on the core assumption of a rollout of effective vaccine in the second half of 2021 and a broader global economic recovery supporting a return in oil demand,” states the company.

In this regard, Fitch Solutions anticipates the benchmark to average $48/bl in 2021 and $50/bl in 2022, down from previous estimates of $51/bl and $53/bl, respectively.

In terms of precious metals, Fitch Solutions has revised down its November 12 gold price forecast from $1 850/oz, to $1 780/oz. It has also maintained its 2021 forecast at $1 850/oz, compared with spot prices of $1 870/oz.

Although Fitch Solutions sees prices averaging higher on a year-on-year basis in 2021, it holds a neutral (and below consensus) view compared with current prices. This is based on sentiment towards gold prices having eased significantly in recent months following the rally recorded in the first half of the year and peak in August.

“While rates will remain accommodative and the dollar will likely depreciate in 2021, keeping gold prices elevated, most of the bullish drivers that led to the 2020 rally will increasingly fade, reducing the likelihood for renewed significant price upside,” states Fitch Solutions.

As such, the company posits that prices will need a strong incremental bullish narrative to exceed the highs reached earlier this year, which it does not expect will be the case.