Oil prices could continue to tumble on slashed demand amid the coronavirus crisis, industry experts said in interviews published by Goldman Sachs, exacerbated by a market share tussle among top producers as the world runs out of storage space.
But the slide could give way to a “healthier global industry,” the bank said in the note dated March 31, rebounding as production is reduced.
Oil expert and Pullitzer-winning author Daniel Yergin told Goldman Sachs that demand could fall by 20 million barrels per day in April, or even more, referring to the “biggest demand drop in modern times” while Saudi Arabia and Russia engage in a price war.
“We’re in for a period of low prices, at least for the next several months, and maybe longer,” Yergin said.
Oil prices are now in the $20s, having slumped in March after a deal on supply curbs between the Organization of the Petroleum Exporting Countries, Russia and other producers, known as OPEC+, fell apart.
How long it takes for the current surplus to be eliminated, and how long prices would stay low, depends more on the trajectory of the coronavirus pandemic, said PIRA Energy Group founder Gary Ross.
“If efforts to control the pandemic are successful within the next three-four months, and we start to rebound in the summer, then we could see a surge in demand growth in 2021,” Ross said.
Goldman’s global commodities head Jeff Currie, meanwhile, reiterated the bank’s view that Brent is likely to stay near $20 a barrel, since producers of the crude have more easy access to waterborne storage than producers of U.S. benchmark West Texas Intermediate crude, which will face extreme price pressure.