Until consumption improves oil prices aren’t likely to recover
Wednesday, April 8, 2020
COVID-19’s effect on global demand for oil has outweighed the impact of the current financial crisis, according to Raymond James & Associates Inc.
John Freeman and Pavel Molchanov believe the capital expenditure reductions announced by the exploration and production sector can reduce supply. The problem is it may take a while for those reductions to impact the market and raise prices.
On the other hand, an increase in shut-in wells of existing production could lead to less supply immediately. Furthermore, when the pandemic subsides and demand recovers, some shut-in wells may never resume producing. The result would be a “rapid bounce in oil prices,” according to Natural Gas Intelligence.
Learn more: Natural Gas Intelligence > Benefits of Cheap Oil ‘Largely Theoretical” Until Consumption Improves, Sara Raymond James
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