Oil demand will not recover until the end of 2021, according to Morgan Stanley
Even though the coronavirus is hitting the whole world, all countries and economic activities, there will always be some that will suffer more. In this case, oil is one of the industries that is being hit the hardest. International travel bans and lockdowns have been lethal to the oil industry. Producers are anxiously awaiting the reopening of demand to release the black gold. The real problem is that demand is not going to recover overnight. Full recovery may not come until the last quarter of 2021, according to the consulting firm Morgan Stanley.
"The post-coronavirus world could see some lasting structural changes in consumer behavior", Martijn Rats, head of oil research at Morgan Stanley, told Reuters. “The demand recovery will be somewhat muted, and we could see some structural changes to people’s behaviour” Rats told reporters.
Analysts say that oil demand is not ready for a rapid V-shaped recovery, as restrictions and closures will be gradually reduced, while many economies will be in recession this year. According to Morgan Stanley, WTI Crude prices are set to stabilize in 2021 at levels around $40 per barrel, and Brent Crude prices could be around $45 per barrel.
According to the International Energy Agency’s (IEA) latest monthly report in April 2020, the loss of demand due to the coronavirus pandemic could lead to a stockpile of 12 million barrels per day (bpd) in the first half of 2020, despite OPEC+'s decision to reduce collective production by 9.7 million bpd in May and June. This oversupply poses a challenge to the industry's storage capacity, as noted by the IEA. And this is the reason for the collapse in the price of the barrel in the United States. Unable to store the oil in their tanks, producers are forced to pay investors to store it in their tanks.
Despite the fact that some countries have offered their strategic stores to absorb the surplus (China increased its supplies at a rate of 2.1 million barrels a day between January and March, while the United States increased them by half a million barrels a day and, after the disaster on 20 April, has committed itself to acquiring 75 million barrels), the scenario is challenging.
The historic OPEC+ production cut deal may have prevented a total disaster in the oil market, but it will be unable to stave off the impending global oil inventory build that is threatening to fill all the available storage in the world over the next few weeks, the IEA said in the middle of April