Some of the world’s biggest investment and energy intelligence firm are all eating their words and retracting earlier projections for oil market after some of the world’s most powerful oil-producing nations failed to agree on a production cut to cushion the impact of the coronavirus outbreak.
Nothing should depress oil markets more than the failure Organisation of Petroleum Exporting Countries (OPEC) and allies members to be cut by an extra 1.5 million barrels per day (bpd) in total until the end of 2020.
However, there is also a more worrisome fact.
Rystad
Norway based, independent energy research company Rystad Energy revised its forecast on Friday, estimating that oil demand growth will come in at 500,000 bpd for the year, down from 1.1 million bpd that it estimated in February.
This is assuming that the Covid-19 epidemic will largely be contained by the end of June, which in turn implies a further downside risk.
Rystad sees supply continuing to surge in countries that are not bound by any production quotas – namely in the US, Brazil, Norway, and Guyana.
Goldman Sach
American multinational investment bank Goldman Sachs slashed again its estimates for 2020, noting that even deeper OPEC+ cuts and central banks’ interventions may not be able to erase the glut amid depressed oil demand and Brent crude could fall to as low as $45 a barrel next month.
Goldman Sachs’ cut its 2020 global oil demand growth forecast again to 150,000 bpd, when it had previously forecast growth of 0.55 million bpd, and before that, 1.1 million bpd.
According to a Goldman note, OPEC+ cuts may help inventories balance later in 2020, but they will not be able to prevent an already sizeable inventory accumulation around the world, because of the slump in demand in the coronavirus outbreak.
For the third and fourth quarter of 2020, Goldman Sachs now sees Brent Crude averaging $53 a barrel in Q3, down from a previous forecast of $60, and averaging $59 in Q4, down from $65 expected previously.
Citigroup
New York-based Citigroup slashed its forecasts for commodity prices across the board, with crude oil getting the steepest downgrade, the investment bank said in a note, as carried by Bloomberg.
Citigroup reduced its oil price forecasts for three of the quarters this year and doesn’t rule out Brent Crude sliding to as low as $47 a barrel as the bank now sees the impact of the coronavirus on oil demand—and the economy in general—as being more severe than initially thought.
Citigroup now sees Brent Crude averaging $54 a barrel in Q1, down by a massive $15 from the previous forecast of $69. The forecast for WTI Crude prices was slashed to $50 a barrel this quarter, also down by $15 from a previous estimate of $65 per barrel.
The bank also cut its estimates for the following two quarters this year, expecting the impact of the coronavirus outbreak to be longer and to linger across the global oil market until the fourth quarter.
Citi sees Q2 Brent Crude prices at $50, down from a previous forecast of $68 a barrel. Third-quarter Brent Crude prices are now expected at $53, down from $63 a barrel. For Q4, Citigroup revised up its forecast to $58 from $57 a barrel.
Bank of America Merrill Lynch
Bank of America Merrill Lynch (BofA) slashed its 2020 oil price forecast for Brent Crude by $8 per barrel. BofA cuts its 2020 average oil price projection for WTI Crude to $49 a barrel and for Brent to $54 per barrel.
