Oil Market Snapshot – April 2020 Demand Leads Supply, With OPEC+ Deal Fragile and Inadequate

Brent has fallen to $22/bbl despite a fresh agreement on April 13th to curtail global production by 9.7 million b/d, while May WTI closed at -$37/bbl, negative for the first time as some traders got caught with undeliverable oil
An agreement of this size was already priced in, and is manifestly inadequate to the scale of the demand decline even assuming 100% compliance
We now see Brent averaging $34.39/bbl in 2020 and $42.70/bbl in 2021 (-$3.94/bbl and -$1.22/bbl on previous, respectively), with further downside risk if global storage is maxed out
Our global demand growth forecast for 2020 is now -5.89 million b/d (-4.44 million b/d on previous), incorporating more of the effect of the ongoing pandemic on the global economy
Visibility on the demand side is very limited at present, so we follow the major agencies in cautioning readers that the above figure may prove a conservative estimate
Our global supply growth forecast for 2020 is -4.82 million b/d in 2020 (-6.91 million b/d on previous), as the collapse in demand leads to shut in production and minimal capex from April 2020 onwards
We see US LTO declining 959,000 b/d on average in 2020 (-1.188 million b/d on previous) as many companies now look to shut-in existing production as quickly as possible as storage disappears
Despite the new production agreement, there has been no reconciliation between Saudi Arabia and Russia. Regional price wars continue between the two countries, particularly in Asian markets

...

If you are interested in a corporate subscription, please contact us at admin@petrologica.com or call us on +44(0)1206 823 295.