New York — Swiss investment bank UBS trimmed its Brent oil price forecast for 2020 Friday but said it saw the market recovering from the third quarter as the impact on Chinese oil demand from the coronavirus outbreak ebbs.
Brent crude will likely average $56/b during the first quarter and $60/b over the full year, downward revisions of $6/b and $3.50/b, respectively, on previous forecasts, UBS said.
Chinese oil demand will likely average 12.1 million b/d during the first quarter, a 1.3 million b/d, or 10%, downward revision to its previous estimate, UBS said.
Overall, UBS cut its 2020 global oil demand forecast by 450,000 b/d, or 0.4%, to reflect largely China's widespread travel bans to contain the virus.
"COVID-19 has added a new negative dimension to oil markets," UBS analyst Jon Rigby said in a note.
"It is early days but at the very least Q1 oil demand will see a dramatic fall in China as economic activity grinds to a halt, and likely spill-over effects onto global activity."
Later in the year, however, weaker effects from the US-China trade dispute, stabilizing demand, expected OPEC action to trim more output and slowing US growth will see the oil market tighten, UBS said.
As a result, the bank saw Brent prices recovering above $60/b in the third quarter but "remaining near the lower end through the year".
At the end of January, S&P Global Platts Analytics forecast that spot Brent would average $65/b by June and $64/b for 2020.