Special Market Report
2020 Unleashes Unprecedented Volatility on Global Crude Markets
Global economic activity is falling at a near-record rate as countries take action to prevent the spread of COVID-19. Simultaneously the OPEC and Russia curtailment agreement falls apart as Russia abandons the willingness to cut production. This has created unprecedented volatility in the global crude market.
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- The near-term impact of both COVID-19 and the Saudi-Russia oversupply tactics will be significant, and we are expecting a period of heightened market volatility and low global crude prices.
- For 2020, we see WTI prices landing within an extensive range, from as low as $10 US/ bbl to the mid-$40’s or above by year-end. This emphasizes how scenario-dependent the price of crude will be in the coming months given the unique scenario crude markets are currently in, with prices being hit on both sides of the supply-demand equation.
- Longer-term, we do know that current spot prices are materially below the marginal cost of supply in a world consuming roughly 100 million bbl/d of crude, which tells us that current prices are not sustainable.
- Substantial supply rationalization to match demand will be needed for stability to return in a rebalanced market. Sproule will continue to monitor the situation and adjust our price forecasts with both the near-term volatility as well as long-term market fundamentals in mind.