Andrey Rudakov | Bloomberg | Getty Images
A historic demand shock triggered by the coronavirus pandemic is expected to worsen in the current quarter, undermining any coordinated effort by heavy goods vehicle manufacturers in Saudi Arabia, Russia and the United States to reduce supply aggressive and rebalance the market, according to a CNBC survey of 30 strategists, analysts and traders.
Episodic peaks of $ 20 a barrel or more in the benchmark crude oil futures seen last week cannot be ruled out as rivals from Saudi Arabia and Russia try to overturn a battle damaging to market share and design a global supply agreement that could reduce up to 15 million barrels per day, the equivalent of about 10% of global supply.
But such price increases are not expected to last, according to the results of the CNBC survey conducted in the past two weeks.
According to the median forecast of 30 strategists, analysts and traders who responded to a CNBC survey, 12 out of 30, Brent Brut futures, the barometer of 70% of the oil marketed in the world, should reach on average $ 20 per barrel at during the current quarter. the responders.
However, almost a third, or nine of those polled, said prices could fall below $ 20 a barrel this quarter.
Among the most pessimistic projections, Daniel Hynes of ANZ saw price risk in the “mid-teens” while Johannes Benigni of JBC Energy warned that Brent and US futures could ” temporarily ‘drop to around $ 10 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC), a supplier of a third of the world’s oil, and its competitors outside the group are “of relatively limited relevance in this context, because they are neither likely nor willing to stem ‘Current demand a shock,’ said Benigni.
Bear forecasters said two forces would keep oil prices depressed in the second quarter – skeptical that Saudi Arabia and Russia would end their price wars and commit to making the deepest cuts history of the producer group (with or without the participation of American shale producers) and an overabundance in the current quarter caused by a monumental collapse in global demand as the total economic severity of the global coronavirus pandemic unfolds.
“A 10% drop in demand is the new normal for oil,” said John Driscoll, director of JTD Energy Services in Singapore and a former oil trader with a career spanning almost 40 years.
World commodity trader, Trafigura chief economist Saad Rahim, offered a bleak forecast. Demand for oil could fall by more than 30 million barrels a day in April, about a third of the world’s daily oil consumption, Reuters reported on March 31, citing forecasts.
And even if Saudi Arabia, its OPEC allies and its main producers outside the group such as Russia and the United States have agreed on an aggressive supply restriction, it is unlikely to physically drain the world stocks which are close to what the petroleum industry calls “longshoremen”, or the limits of storage capacity.
Too little, too late
“Long and short is that the current rally will likely be short lived,” said Citigroup oil strategists led by Ed Morse in a report on April 2.
“The three big oil producers may have found a way to work together to balance the markets, but it looks like it is too soon. This means that prices should drop to a single digit to make it easier to fill stocks and stop production. “
Fatih Birol, executive director of the International Energy Agency, said oil stocks would continue to increase by 15 million barrels per day in the second quarter, even with production declines of 10 million barrels per day , Reuters reported on April 3.
Citi expects Brent to average $ 17 a barrel in the current quarter and warned Moscow, Riyadh and Washington “ultimately cannot keep prices from falling below $ 10 before the end of April” .
In addition, travel restrictions, border closings, closures and economic disruption caused by “social distancing” and other measures taken by governments worldwide to slow the spread of the virus will take a heavy toll demand for oil and may even persist when the virus disappears, clouding prospects for recovery.
“As for the second quarter or even the third, I don’t see a recovery in V-prices,” said Anthony Grisanti, founder and president of GRZ Energy, who has over 30 years of experience in the futures industry.
“The more people are closed, the more behavior will change … I have trouble seeing oil above $ 30-35 a barrel in the next 6 months. “