Oil Price Forecast - Reality Check at Raymond James

[dan_s]

RJ's updates their oil price forecast.

The oil market meltdown year-to-date, and especially last week, has been epic in scale and unmitigated in harshness. The fact that global equity markets have entered an outright bear market hardly makes the oil crash "feel" any better. Today we are slashing our 2020 oil price forecast for the third time in three months. Our oil price update from February 24 took into account an initial estimate of COVID-19's impact on oil demand, focusing on the epicenter in China. Since then, the situation in China has stabilized, but in Europe and the U.S. there is huge deterioration. This alone would have been enough for us to revisit our price deck. But demand headwinds are only part of the story. The crescendo of oil's collapse, last Monday, was due to the supply side of the equation: Saudi and Russia abruptly walked away from talks regarding production cuts, effectively starting a price war.

So, are things bad? Of course. But are they hopeless? No. Here are three points that may be getting overlooked amid what is surely the worst energy sector sentiment ever.
> First, the cure for low oil prices is low oil prices, and next year we are forecasting a meaningful decline in U.S. production (and in other short-cycle producing countries as well).
> Second, the Saudi-Russia price war is largely political, and also self-destructive, so we expect it to be short-lived.
> Third, as hard as it may be to believe now, COVID's demand impact will also subside over time.

All that being said, make no mistake, we expect the oil market to get much worse in the near-term (WTI likely tests $20/Bbl in 2Q) before rebounding strongly in the second half of 2020 (exiting the year at $45+).

[dan_s]

Trump Announces Massive Oil Purchase for Strategic Petroleum Reserve
On Friday, President Donald Trump announced that he has instructed the Secretary of Energy to begin buying tens of millions of barrels of oil for the Strategic Petroleum Reserve. "We're going to fill it right up to the top," he said in a White House speech that primarily focused on the response to the coronavirus.