Oil Market to Remain in Surplus in Second Quarter amid Coronavirus

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Oil market is expected to remain in surplus in the second quarter of 2020 amid coronavirus outbreak. Trend reports citing UK-based Capital Economics research and development company.

“Oil prices plummeted this week as a surge in COVID-19 cases outside of China weighed heavily on investor sentiment and caused a broad sell-off in risky assets. Prices were also dampened by concerns about the growing loss in China’s crude demand. where economic activity is struggling to return to normal even after virus containment measures were relaxed. We no longer expect Chinese economic growth and oil consumption to fully recover their losses from the first quarter.“ the company said in its report.

Therefore. Capital Economics now thinks that the oil market will remain in a surplus in the second quarter.

“Implicit in our new market balance forecast is the assumption that Libya’s output will remain offline during the second quarter and that OPEC+ will maintain output constraint until the end of 2020. That said. the latest slump in oil prices may convince the group to deepen its output cuts at its meeting next week. We will be reviewing our oil price forecasts after the meeting.“ reads the report.

In general. according to Capital Economics’ estimates. the prices of almost all commodities plunged this week amid fears that the coronavirus is morphing into a pandemic. with negative implications for global economic activity and commodities demand.

“Prior to the virus outbreak. we had expected a gradual pick-up in global growth to support most commodities prices. This week. we revised our metals forecasts to reflect our more bearish view on the outlook for China. In the next few weeks. as the global impact becomes clearer. we expect to revise our energy and precious metals forecasts.“ said the company.

There could be some respite for oil prices if OPEC+ decides to deepen output cuts at the meetings scheduled for March 5-6. reads the report.

“The chances of further output cuts have increased in the last week or so as the virus has spread rapidly outside China. That said. given the scale of risk aversion in financial markets. any OPEC+ action is more likely to stem further falls in oil prices rather than give them a lift.“