Oil Market Snapshot – May 2020 Brent Holds Around $35/bbl As US Inventories Peak Amidst Talk Of Extended Cuts

Brent has risen to c. $35/bbl in May as demand lifts from its lows, US inventories ease and OPEC+ cuts start to take effect, though the benchmark was a little below this level after a build in US inventories
There is now talk of extending the 9.7 million b/d cuts level to the end of the year, though we question whether this would be widely adhered to as demand starts to return
We now see Brent averaging $34.49/bbl in 2020 and $51.34/bbl in 2021 (-$0.10/bbl and +$8.64/bbl on previous, respectively), though 2021 faces downside risks from a resurgence of COVID-19
Our global demand growth forecast for 2020 is now -6.12 million b/d (-230,000 b/d on previous), incorporating wider expectations of a more prolonged recovery in the global economy
The short term demand nadir appears to be passed, but full recovery is now expected to take longer
Our global supply growth forecast for 2020 is -7.02 million b/d in 2020 (-1.29 million b/d on previous), revised down on further voluntary OPEC cuts and involuntary declines in US LTO
We see US LTO declining 1.1 million b/d on average in 2020 (-141,000 b/d on previous) on more visibility regarding shut-ins, which we estimate to total c. 3 million b/d at present
Indications of good compliance in the first month of the new OPEC+ deal are encouraging, but we expect these to be mostly indicative of the poor state of demand

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