latest-news-headlines Market Intelligence /marketintelligence/en/news-insights/latest-news-headlines/the-worst-is-behind-us-analysts-see-continued-recovery-for-global-oil-markets-59174359 content
Log in to other products

Login to Market Intelligence Platform


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

'The worst is behind us': Analysts see continued recovery for global oil markets

Essential Energy Insights - June 11, 2020

Webinar Replay

Deep Dive on Oil & Gas for Financial Institutions

Essential Energy Insights - May 28, 2020

Essential Energy Insights - May 14, 2020

'The worst is behind us': Analysts see continued recovery for global oil markets

After reaching historic lows in April, global oil prices could continue to chop higher in the coming months as COVID-19 shelter-in-place restrictions begin to lift.

Speaking at the Global Executive Petroleum Virtual Conference hosted by S&P Global Platts on June 24, analysts pointed to reduced global supply and the faster-than-expected return of demand keeping both Brent and West Texas Intermediate crude prices on an upward trajectory. Most analysts see prices stabilizing between $50 per barrel and $60/bbl by year's end, still shy of pre-pandemic levels.

"We think the worst is behind us," Neil Atkinson, head of oil markets at the Paris-based International Energy Agency, said at the conference. "The market is gradually adjusting."

WTI crude futures on the New York Mercantile Exchange have surged more than $75 since the May contract settled at negative $37.63/bbl on April 20, with prices roaring back to near $40/bbl in a matter of weeks as U.S. producers quickly shut-in output. On June 22, WTI front-month futures settled above $40 per barrel for the first time in more than three months but pulled back June 24, when the August delivery WTI contract settled at $38.01/bbl.

SNL Image

In a recent survey of producers in the Dallas Federal Reserve's 11th district — which includes Texas, northern Louisiana and southern New Mexico — about half the respondents said prices at or below $40/bbl were sufficient to restart shut-in horizontal wells. A quarter said they would need to see prices of $46/bbl or higher to restart.

Prices for WTI and Brent crude futures generally run close to the same levels, but the spread between them widened dramatically in April when WTI turned negative for the first time ever, highlighting the fear that storage at Cushing, Okla., the delivery point for NYMEX WTI futures, was nearing capacity.

"Delivery of Brent is seaborne, not landlocked like WTI," ICE Futures Europe President Stuart Williams said during the conference. With the ability to charter vessels, "the available storage for Brent is much broader," he said.

As a result, Brent crude oil prices are less susceptible to localized storage and pipeline issues like WTI, Williams said.

Analysts largely agree that WTI prices are unlikely to return to negative territory following their historic collapse in April. Instead, the recovery in Brent and WTI oil prices will likely continue, assuming inventories continue to be drawn down, a second wave of COVID-19 can be averted, petroleum demand continues to ramp higher, and countries comply with OPEC+ output cuts.

Citi's global head of commodities research, Ed Morse, said at the June 24 conference that in the bank's base case scenario, WTI oil prices should average $45/bbl in the fourth quarter before gradually rising to an average of $57/bbl by the fourth quarter of 2021. Citi expects Brent crude prices will average $48/bbl in the fourth quarter of this year and increase to an average of $61/bbl in the final quarter of 2021. Brent crude oil prices settled at $40.31/bbl on June 24.

SNL Image

In early June, OPEC and its allies extended production cuts by one month, or through July. Absent Mexico, which will no longer reduce its output by 100,000 bbl/d, the other producing countries approved the rollover of their 9.6 million bbl/d production cut accord. The cuts, originally 9.7 million bbl/d, including Mexico, had been scheduled to taper to 7.7 million bbl/d in July through the rest of the year.

Atkinson said global oil supply is anticipated to decline by a record 7 million bbl/d in 2020 on the back of the organized cuts from OPEC+, which were supplemented by economically driven reductions by the U.S. and other producers.

"As demand gradually recovers, and supply falls sharply, led by OPEC+ cuts and market-driven shut-ins, global inventories could draw at record rates in Q3 after record builds in Q2," Morse said.

For 2020, global oil demand could decrease by about 8 million bbl/d, Atkinson said. Oil demand is then expected to grow by 5.7 million bbl/d in 2021, he said.

S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.