"The price drop is on track to continue for the next two quarters at the very least. Brent and WTI will need to get used to oil prices below $ 30," said Edward Moya, chief market analyst at Oanda Brokerage.
Crude futures fell more than 30 percent at one time last Monday, the largest drop in a single day since 1991, after the agreement between the Organization of Petroleum Exporting Countries (OPEC) and its allies, including Russia, could not be reached within the framework of what is known as "OPEC +". , To extend their production cuts.
At the same time, US shale oil producers rushed to deepen spending cuts and reduce future production, and the stuttering of the "OPEC +" agreement adds to concerns about demand under pressure due to the high-speed global spread of the Coronavirus, which has paralyzed supply chains and caused a downturn in financial markets.
It is expected that the global demand for oil will pass its first quarterly decline for the first time since 2008, as most analysts predict a decrease in total global demand between 0.8 million barrels per day and four million barrels per day in the first half of 2020, and for the whole year, slight growth in demand is expected at Between 0.1 million and 0.5 million barrels per day.
On the other hand, Goldman Sachs expects that the oil market will witness a record surplus of about six million barrels per day by April, taking into account the larger-than-expected rise in low-cost production, while lower demand resulting from the outbreak of the Coronavirus is "increasingly widespread". ".
Goldman Sachs said in a note dated March 12: "The reaction of the high-cost producers when we expect that Brent crude in the second quarter of 2020 will record the price of $ 30 a barrel will not be sufficient quickly to dispel the impact of the record large increase in inventory, which will occur in the coming months."
The bank's analysts added that a jump in stocks may also force some high-cost producers to stop production, as the logistics conditions of storage may be under pressure.
The American bank estimated demand losses due to the spread of the Coronavirus, which is spread at about 4.5 million barrels per day, but pointed to some indications of the improvement in Chinese demand for oil.
He noted that the accumulation of oil stocks over the next six months may be similar to the increase, which occurred over the 18 months between 2014 and 2016.
On the other hand, the growth in world demand will witness a decrease of about 310,000 barrels per day in 2021, and it will significantly differentiate the impact of any rapid reaction on the level of supply by high-cost producers, in particular, with expectations currently for shale oil production to drop by 900,000 barrels per day. In the first quarter of 2021.
Goldman Sachs noted that "any possible new escalation of geopolitical tension in the Middle East will not prevent the downward pressure caused by a rapid accumulation of stocks unless it leads to major historic supply interruption."
On the expected American production, the bank expected that "American oil production will decrease by more than one million barrels per day from the high levels recorded in the second quarter of 2020 by the third quarter of 2021 ... We believe that companies that announce cuts in capital spending are generally preparing for an oil price that ranges between 30 and 35 dollars a barrel for many seasons. "
In addition, Daniel Yergen, the US energy expert, believes that it will take a long time to relieve pressure on falling oil markets at a time when the Coronavirus causes public events to be closed and schools closed.
Trump administration officials are studying several ways to support energy producers, including buying oil at current low prices to store it within the Strategic Petroleum Reserve, held in warehouses along the Texas and Louisiana coasts.
But Yergin, who sometimes advises US officials on energy issues, is skeptical. "I don't see how the strategic oil reserve can be used ... With the amount of oil coming into the market, this will actually lead to stockpile inflation, and it will take a long time to reduce it," he said.
It will be difficult to prove that anyone is offering oil at less than its market value, and in any case, fixing the matter will not be overnight, said Yergin, who is also IHS Market's deputy chairman.
He continued: "Low gasoline prices do not do much when schools are closed, and people cancel all their trips, and work from home," expecting an acceleration of the merger of energy companies, as he sees that "the merger will be one way for people to reduce costs."