Due to the drop in global oil demand, in combination with the existing and most likely even rising oversupply, oil prices will continue to trade lower, and for longer, in the opinion of Hans van Cleef from ABN Amro.
Key quotes
“Global oil demand will only modestly recover during the second half of 2020. At the same time, global inventories will remain high and with the risk of all oil producers stepping up their production, the oil glut will remain for longer.”
“We expect that there is a good chance that OPEC will come to some sort of a deal before the existing agreement expires at the end of this month.”
“For now, we have lowered our Brent oil forecast for the end of this quarter from USD 60/bbl to USD 40/bbl. For the second quarter, we have revised our forecasts from USD 55/bbl to USD 48/bbl with downside risks if a OPEC or OPEC+ deal is not reached in the course of this month. We have lowered the Brent year average forecast for 2020 to USD 49 from USD 58.”
“In our most important risk scenario, oil prices will remain trading low (USD 30-40 range). A recovery of the oil prices should then come from lower US production. However, it could take several months before the negative impact of the low oil prices start to impact the production numbers.”
“If US production would starts to decline, oil prices could find their way up again and recover into the USD 40-50/bbl range.”
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