Five Critical Supply and Demand Questions
COVID-19 has created a demand shock in the oil market as social distancing reduces movement and daily travel for more and more of us each day. At present, most of the reporting agencies expect oil demand growth this year to be largely flat, well below the 1.2 million barrels/day (mmb/d) expected just a few months ago. And this demand growth forecast will likely be revised down further as large gatherings are cancelled, schools shut their doors, and companies implement policies to encourage or mandate working from home.
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Demand shocks are historically acute, with strong recoveries once the crisis is past. But on top of this demand shock is a supply shock, with the OPEC+ group unable to come to an agreement in early March. Instead of cutting production by the suggested 1.5 mmb/d, the group is now free to increase production as they wish. An aggregate 4+ mmb/d in incremental production may now further flood the market in the second quarter of 2020. A combined demand and supply shock is likely to test new oil price lows, and the excess stocks that are accumulated will be difficult to work off. The supply overhang looks so daunting right now that even robust companies will face significant threats to their business.
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ADIPEC IN ASSOCIATION WITH BOSTON CONSULTING GROUP PRESENTS:
FUTURE ENERGY DEMAND: PERSPECTIVES ON FUTURE TRAJECTORIES AND PRICING ASSUMPTIONS
4 MAY 2020 12PM GMT | 8AM EST | 7AM CST | 4PM UAE | 5:30PM IST | 8PM SGT