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Oil Market Snapshot – March 2020 Brent Routed After OPEC's Last Waltz with Russia in Vienna, Pandemic

  • Brent has been routed to $26/bbl, as the world implements measures to tackle the COVID-19 pandemic and the OPEC+ agreement collapses
  • We now see Brent averaging $38.33/bbl in 2020 and $43.92/bbl in 2021 (-$25.33 and -$20.61 on previous, respectively), with further downside risk if containment measures are prolonged
  • Our global demand growth forecast for 2020 is slashed to -1.45 million b/d (-2.38 million b/d on previous), with a global recession now a racing certainty. Most of the fall comes from jet fuel and gasoline consumption as a third of the world population is in lockdown
  • Our global supply growth forecast for 2020 is 2.09 million b/d in 2020 (+1.18 million b/d on previous), as Saudi Arabia, Russia and others engage in a battle for market share
  • US LTO is expected to cut capex by at least 30% this year, but despite this it will still grow at 241,000 b/d on average (-259,000 b/d on previous) due to a hangover from 2019’s growth rate. A 40% capex cut would see an exit to exit decline of 833,000 b/d
  • We do not see a speedy reconciliation between Russia and Saudi Arabia, with c. 2.5 million b/d capable of hitting the market within 6-9 months from OPEC+ participants

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