Published: Fri, March 27, 2020
Markets | By Otis Pena

Oil set for weekly gain on risk rally despite demand devastation

Oil set for weekly gain on risk rally despite demand devastation

The combined debt of Chevron, Total, BP, Exxon Mobil and Royal Dutch Shell stood at $231bn at the end of in 2019, just shy of the $235bn hit in 2016 when oil prices also tumbled below $30 a barrel.

Goldman says demand for jet fuel and gasoline is deteriorating as governments restrict travel or would-be travelers stay home.

Goldman Sachs forecast global oil demand, which stood at around 100 million barrels per day (bpd) past year, will fall by 10.5 million bpd in March and 18.7 million bpd in April.

West Texas Intermediate (WTI) crude futures settled at US$22.60 a barrel, falling US$1.89, or 7.7 per cent. Brent crude futures settled at US$26.34 a barrel, shedding US$1.05, or 3.8 per cent.

It was explained that as storage space becomes harder to find, the prices, which have already fallen more than half this year, could drop even further.

Oil prices fell on profit taking Thursday after three days of gains, helped by the Federal Reserve's sweeping stimulus measures and optimism surrounding a USA $2 trillion emergency stimulus plan.

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The U.S.' crude oil production is expected to average 13 million bpd in 2020, according to the EIA's Short-Term Energy Outlook report for March. $2 trillion emergency stimulus will bolster economic activity.

Global demand is expected to fall by 10.5 million barrels a day in March and 18.7 million barrels a day in April.

Although oil futures received a "sentiment-led boost this morning, the challenge for the physical oil market is a looming and growing oversupply which will cause a "nowhere to hide" situation very soon", said Bjornar Tonhaugen, head of oil markets at Rystad Energy.

Oil prices have fallen by more than 45 per cent this month after OPEC+, comprising the Organization of the Petroleum Exporting Countries (OPEC) and other producers, including Russian Federation, failed to agree on extending output cuts.

The world does not need all this oil.

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