Harare – The World Bank says the prices of crude oil, natural gas and coal all rose by around one-third in the first quarter (Q1) of 2021.
Crude oil prices are recovering from a COVID-19 slump at a record pace, driven by firming demand as well as continued production restraint by the Organisation of Petroleum Exporting Countries (OPEC) and its partners. However, uncertainty about the evolution of the pandemic and its impact on oil demand continue to weigh on prices.
“Oil prices are expected to average US$56 per barrel in 2021 and US$60/bbl in 2022, as demand slowly returns to pre-pandemic levels and OPEC+ gradually raises production. Natural gas and coal prices are also expected to see sharp increases in 2021 as the economic recovery gains momentum. The speed of the recovery in oil prices exceeds that of any other recorded episode.
“Prices have responded to the gradual firming in oil demand and improved optimism about the global recovery, as well as continued production restraint by OPEC and its partners. However, prices have eased recently amid rising uncertainty regarding the containment of the pandemic and its impact on future oil demand, as well as OPEC’s decision in April to gradually raise production from May,” notes the World Bank April Commodity Outlook.
Global gas demand is expected to recover to 2019 levels, but with uncertainties regarding the recovery trajectory of fast-growing markets compared with more mature regions. Sectorial demand, on the other hand, is subject to a variety of risk factors including fuel switching, slow industrial rebound or milder weather.
Meanwhile, World Oil reports that there were 27 mergers and acquisitions worth US$4.81 billion in Africa and the Middle East in Q2021, down from the last four-quarter average of 40.25 deals.
“The top five oil and gas deals accounted for a 94.9 percent share of the overall value during Q1 2021.The combined value of the top five deals stood at US$4.56 billion, against the overall value of US$4.81 billion recorded for the quarter,” said World Oil.
Countries within the Southern African Development Community are heavily reliant on petroleum products from imported crude. Most of these countries are net importers of these petroleum products, with Angola being an exception SADC countries are price-takers and therefore vulnerable to global oil price changes. Oil price increases could have a detrimental effect on SADC economies, and energy security could also be compromised by the high dependency on oil imports.
Mr Tataenda Nyachega, a Zimbabwean economic analyst, pointed out that oil price increases may be advantageous to oil exporters but a challenge to oil net importers.
Mr Nyachega said, “In as much as the high price of oil is a unique opportunity for African oil producers to use the windfall gains to speed up their development. On the other hand, oil price rises may have adverse effects on Southern Africa’s net-oil importing countries, who cannot access international capital markets to smooth out the increases. Hence if oil prices continue to surge they may have inflation effects on SADC countries.”