International Oil Prices to Fall Further... "Expected to Drop Below $20 per Barrel in Q2"

Despite Efforts for Production Cuts, COVID-19 Demand Shock Expected to Worsen

Citigroup Forecasts Brent Crude Oil at $17 per Barrel

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kwon Jaehee] Amid rising international oil prices due to expectations of a production cut agreement between Saudi Arabia and Russia, there are forecasts that international oil prices will instead fall below $20 per barrel.

According to a survey conducted on the 5th (local time) by CNBC targeting 30 experts including analysts and traders, despite efforts for production cut agreements among Saudi Arabia, Russia, and the United States, the demand shock caused by the novel coronavirus infection (COVID-19) is expected to worsen further in the second quarter.

CNBC reported that Brent crude oil futures, which account for 70% of global oil trading volume, are expected to average in the $20 range this quarter.

Among the 30 experts surveyed, some also warned that both Brent crude and West Texas Intermediate (WTI) could temporarily fall to around $10 per barrel at one point.

Johannes Benini, a researcher at JBC Energy, stated, "OPEC, which supplies one-third of the world's oil, and competing countries currently neither have the will nor the ability to prevent the demand shock, so even if an agreement is reached, it will be quite limited."

Sad Rahim, chief economist at Trafigura, a global commodity trading company, offered a more pessimistic outlook. He predicted, "Global oil demand could decrease by more than 30 million barrels per day in April."

The reason pessimistic forecasts predicting a decline in international oil prices continue to emerge is mainly because the COVID-19 demand shock is stronger and more prolonged than expected. Citigroup commented, "While oil-producing countries may have found ways to cooperate to balance the market, it is already too late."

Fatih Birol, Executive Director of the International Energy Agency, forecasted, "Despite a production cut of 10 million barrels per day, oil inventories will increase by 15 million barrels per day in the second quarter."

Citigroup projected Brent crude oil to average $17 per barrel in the second quarter.