Crude oil and natural gas prices will remain volatile through the end of 2021, as supply and demand face an ongoing rebalancing act following the economic and market fallout caused by the COVID-19 pandemic, according to analysts.

"The global oil and gas industry's recovery from coronavirus-related market disruptions will depend on gradually increasing demand as economic activity picks up, particularly in China, Southeast Asia, and the U.S.," Moody's wrote in an Aug. 23 report. "The recovery will likely be uneven, with the pandemic unsettling long-term energy consumption patterns and heightening volatility in oil and gas prices."

Moody's expects West Texas Intermediate crude prices to average $30 a barrel in 2020 and $40/bbl in 2021 and Brent crude oil to average $35/bbl this year and $45/bbl in 2021.

Moody's oil price projections are bearish compared to S&P Global Platts Analytics' recent outlook issued in July, which calls for an average WTI price of $37.50/bbl in 2020 and $40.70/bbl in 2021. Platts Analytics is also projecting an average Dated Brent crude oil price of $40.50/bbl in 2020 and $44.20/bbl in 2021.

Evercore ISI analysts said Aug. 20 they see Brent prices rising to $50/bbl by the end of 2020 and ticking up to $55/bbl by the end of 2021, posting a yearly average of $45/bbl in 2020 and $50/bbl in 2021.

WTI has surged more than $80 since the May contract on the New York Mercantile Exchange settled at a historic low of negative $37.63/bbl on April 20, roaring back to near $40/bbl in a matter of weeks as U.S. producers quickly shut in output. As a result, the differential between WTI and Brent continues to narrow. Front-month WTI futures settled the Aug. 24 session at $42.62/bbl while Brent crude oil ended at $45.13/bbl.

However, Moody's warned that the closer crude prices get to $50/bbl, the more likely it becomes that producers will return output that was idled as demand and prices crashed during the onset of the pandemic. Another supply glut in the wake of still recovering consumption could send oil prices tumbling again.

"Some non-OPEC producers are more likely to bring their idled shale production back online if oil prices continue to improve toward $50/bbl, contributing to oil price volatility if demand remains slow," Moody's said.

Investment activity is expected to recover from 2020 lows "but will remain muted because of the higher cost of capital, and uncertainty about the pace and trajectory of growth in demand," Moody's said.

In addition to its crude oil outlook, Moody's expects Henry Hub natural gas prices to average $2.00/MMBtu in 2020 and $2.25/MMBtu in 2021.

S&P Global Platts Analytics' price forecasts for Henry Hub gas are more bullish, with estimates for average prices of $2.13/MMBtu in 2020 and $3.29/MMBtu in 2021.

"The Henry Hub price forecast skews bullish given the need for dry gas production at margin," Platts Analytics analyst Rich Redash said in an Aug. 24 email.

S&P Global Platts and S&P Global Market Intelligence are owned by S&P Global Inc.