Brent prices could fall to $45 per barrel in April
Goldman Sachs lowered its Brent price outlook, saying OPEC + cuts and central bank rate cuts would not be enough to curb a large inventory build caused by declining demand due to the coronavirus outbreak.
Brent prices could drop from an earlier estimate of $ 53 in April to $ 45 a barrel before gradually recovering to $ 60 by the end of the year, Wall Street Bank said in a statement on Tuesday.
On its second downward correction in less than a month, the bank lowered its third and fourth quarter Brent price forecasts from $ 60 and $ 65 to $ 53 and $ 59 a barrel, respectively.
Oil prices rose on Wednesday after a committee of the Organization of Petroleum Exporting Countries (OPEC) and its allies, a group called OPEC +, recommended lowering oil production by an additional 1 million barrels a day (bpd) on Tuesday.
“While such cuts will help normalize oil demand and inventories later this year, they can’t prevent an already started large oil inventory accumulation,” the bank said.
Goldman analysts also lowered their demand forecast for 2020 to show that consumption will decrease by 150,000 bpd over the previous year, the lowest growth rate since the 2008 financial crisis. Previously, growth of 550,000 bpd was forecast.
Goldman Sachs said in view of his demand forecast that the current spot prices are already pricing in a production cut of 2 million bpd reduced by OPEC in the second quarter of 2020.
“It will take sustained curtailed OPEC+ production – rather than global synchronized rate cuts – to help prices gradually recover from April onwards,” the bank’s analysts said.
The rapidly spreading corona virus has infected nearly 91,000 people worldwide, more than 80,000 of whom are in China.
Other banks, including Bank of America (BofA) Global Research, Morgan Stanley and Standard Chartered, have recently lowered their oil price forecasts as the virus threatens global oil demand.