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Oil prices could fall below $20/b warn analysts

The price of Brent fell below $25/b at one point on 18 March 2020, its lowest level in 18 years. It recovered to the £27/b mark the following day, but analysts warn that prices for both Brent crude and West Texas Intermediate crude are likely to fall below the $20/b benchmark in the near future. 

Jack
Allardyce, Oil and Gas Analyst at Cantor Fitzgerald Europe, believes the benchmarks ‘could go lower still as demand continues to fall amidst government measures [globally] to stem the spread of the coronavirus and Saudi Arabia, and to a lesser extent Russia, ramp up output in a bid to capture market share’. He adds: ‘Sub-$20 oil is a distinct possibility as the crisis intensifies over the coming weeks, as excess supply grows and storage is filled up.’

Allardyce does not believe current prices are sustainable in the medium term given achievable break-even costs. ‘While Saudi Arabia may be able to pump oil at these levels, given its low cost of production and cash reserves, we would expect the fiscal pain brought about by the continuing price collapse to bring about the resumption of negotiations with other major producers, including Russia,’ he says. ‘However, how much of a difference any new supply agreement could make in the short-term is unclear, with the demand picture likely to remain uncertain while the current pandemic plays out.’

News Item details


Journal title: Petroleum Review

Subjects: Oil markets, Oil prices, Forecasting

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