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The US banking giant, Goldman Sachs, said in a recent note, the oil market would be swooning in record supply by April amid coronavirus led slump in demand and a bigger-than-expected surge in low-cost output.
“Oil market could see a record surplus of about 6 million barrels per day by April.
The high-cost producer response at our second quarter 2020 $30/bbl Brent forecast will not be sufficiently fast to offset the record large inventory builds set to occur in coming months.
The jump in inventories could also force some inland high-cost producers to shut production, since storage logistics may be stretched.
The demand loss is due to the fast-spreading coronavirus outbreak at about 4.5 million bpd.
The accumulation of oil inventories over the next six months could be similar to a build up over 18 months in 2014-16.
Global demand growth, on the other hand, would see a reduction of about 310,000 barrels per day (bpd) in 2021 and comfortably offset any fast supply response from high cost producers, especially with the shale output now forecast to drop by 900,000 bpd in the first quarter of 2021.
Finally, any potential re-escalation of geopolitical tensions in the Middle East would not prevent the bearish pressure of quickly accumulating inventories unless it led to a historically large outage.”
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