Oil Price Fundamental Daily Forecast – Demand Destruction, Rising Production Could Push WTI Prices to $15

U.S. West Texas Intermediate and international-benchmark Brent crude oil are trading mixed shortly after the regular session opening on Monday, while posting an impressive intraday rebound rally. Earlier in the session, both markets gapped lower on the opening as lockdowns and travel curbs designed to stem the spread of the coronavirus pandemic weighed on demand.

Additionally, traders continued to brace for the dumping of about 4 million barrels per day of crude oil on the market after April 1 as Saudi Arabia and Russia are expected to follow-through on their threat of a price war.

At 12:28 GMT, May WTI crude oil is trading $22.93, up $0.30 or +1.33% and June Brent crude oil is at $28.59, down $0.41 or -1.41%.

“Markets are beginning to price in recession scenarios as aggressive fiscal and monetary stimulus misfire,” analysts at ING said in a note.

While nations imposed stricter restrictions on movement, central banks in the region have adopted a range of measures to boost liquidity and spur growth in markets by their efforts have paled in comparison to the speed of the virus’ spread and the economic toll.

Demand Expected to Plunge

Demand is expected to fall by more than 10 million barrels per day (bpd), or about 10% of daily global crude consumption, said Giovanni Serio, head of research at Vitol, the world’s biggest oil trader.

Goldman Sachs estimated demand loss could total 8 million bpd, brought about by countries slowing economic activity to combat the coronavirus outbreak.

Huge Supply to Hit the Market

Saudi Arabia is expected to bring an additional 2.6m barrels per day (bpd) of supply to the markets in April, raising its overall supply for the month to 12.3m bpd. The UAE is set to increase output by a million bpd to 4m bpd next month.

Daily Forecast

Traders are bracing for the possibility of $15 – $10 crude oil prices as demand continues to fall and the Saudis and Russians are expected to follow-trough on their threats to increase production. This is likely to nearly shut down U.S. production.

The Trump administration is considering intervening in the Saudi-Russian oil-price war, and Texas regulators are weighing whether to curtail crude production for the first time in decades, as U.S. producers suffer from a historic crash in prices.

Look for lower prices over the near-term unless Russia and Saudi Arabia declare a truce. This news should trigger a short-covering rally, but will not be enough to change the trend to up due to the demand problem.