The worst for oil is over, but the road to recovery will be long and windy, Bloomberg’s Javier Blas tweeted, citing Morgan Stanley analysts.
According to them, April was the worst month for oil demand, which from now on will begin to recover, albeit slowly. Oil inventories will continue to rise, however, which suggests it will be a while before oil prices could post any palpable improvement.
Because of this, the Morgan analysts kept their price forecasts unchanged, with Brent seen at $35 a barrel in the fourth quarter of the year, up from $25 during the current quarter.
Last week, Morgan Stanley’s analysts warned that oil demand was unlikely to return to pre-crisis levels until the end of 2021.
“The demand recovery will be somewhat muted, and we could see some structural changes to people’s behaviour,” Martijn Rats, head of oil research at the investment bank, said. In that, he reflected what seems to be the dominant opinion: that a quick recovery for oil prices is impossible because of the gradual relaxation of national lockdowns that would in turn lead to a slow and gradual recovery in oil consumption.
Meanwhile, prices have been rising, supported by an acceleration in oil well shut-ins, notably in the United States, and early signs of demand return. In North Dakota alone, oil production was down by a third following the shut-ins, at 400,000 bpd less at the end of April from March. In Texas, producers are also shuttering production, leading the commissioner who wanted to impose obligatory output cuts to drop the idea.
After gaining some 20 percent on Tuesday on the news of the gradual reopening of the economy that would stimulate fuel demand, U.S. oil prices started sliding back down again, following API’s release of its weekly inventory estimate, which showed yet another build, of 8.44 million barrels.
By Irina Slav for Oilprice.com
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