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Strategists at Westpac Institutional Bank have cut their crude oil price forecasts. This reflects the significant hit to demand from COVID–19 and the breakdown of OPEC+ negotiations.

Key quotes

“Demand is expected to collapse by over 3.2mbpd in Q2 while at the same time Saudi Arabia and Russia turn to maximising production which could see the market being oversupplied by as much as 5mbpd.” 

“Our Brent forecast for June has been lowered by US$35/bbl to $30/bbl and the year-end forecast is now 36% lower at U$32/bbl (it was US$50bbl).”

“Moving into the second half of 2020, crude production is set to moderate, mostly from a correction to US tight crude production but also an easing in the OPEC+ tensions.” 

“Through 2021, as non–OPEC supply moderates and demand returns to trend, the price recovery will be modest as Saudi Arabia and Russia remain focused on growing market share and as US production starts to lifts again, responding to higher prices.”