Goldman Sachs reported that oil market by April to deal with a record surplus of about 6 million barrels per day, given the greater than expected rise of low-cost production, there is “increasing” the drop in demand due to the coronavirus.
the price of oil may fix the maximum since the financial crisis of 2008 the weekly drop, after the failure of negotiations on the deal, OPEC+ last week.
“the Reaction of high-cost producers with our forecast of Brent prices in the $ 30 per barrel in the second quarter of 2020 will be not fast enough to compensate for record growth in reserves expected in the coming months”, - stated in the note of the Bank from March 12.
Jump in reserves may also force some companies with the high costs of operating on land, to stop production, said analysts.
the Bank estimates the loss in demand due to rapidly spreading outbreaks of coronavirus around 4.5 million barrels per day, although he also pointed to some signs of improvement in demand from China.
According to the Bank, the growth of oil reserves over the next six months may be a similar increase in 18 months in the years 2014-16 will be presented.
on the other hand, the growth in global demand will drop by about 310,000 barrels per day in 2021 and easily compensates for any quick response on the part of the high-cost producers, especially given the fact that shale oil production is expected to fall by 900,000 barrels per day in the first quarter of 2021, added the Bank.
“Finally, any potential renewed escalation of geopolitical tensions in the middle East will not prevent a bear the pressure of a rapidly growing inventory, unless it will lead to historically major outage”.
