In a shocking projection, Goldman Sachs has predicted that by end of this month, there is the likelihood of Oil demand surpassing supply, thereby triggering some measurable likely rebound in the Oil market. Head of Goldman Sachs commodities department, Jeffrey Currie in an exclusive analytical projection published in the current edition of Oilprice, quoting Baron’s Market Brief, said demand could exceed supply by the end of this month, stressing that this may be premised on dynamics such as the current production cuts executed by all major Oil producing countries.
However, he was quick to add that this projection is neither enough nor constitute a sufficient basis for cheers and unnecessary expectations. According to Currie, this is because there are some 1.2 billion barrels of oil in storage facilities that would need to be drawn down before prices start picking up, predicting that this development might take three stages to materialize.
The energy experts at Goldman Sachs explains that given these dynamics, the first stage would entail that oil in storage capabilities running into about millions of barrels in floating storage facilities would have to go. “It is the most expensive kind of storage, so it would make sense that traders and producers would first aim to get rid of it to save on tanker fees’’, he says adding that “this will happen sometime in the third quarter of the year.”
According to Currie, the quantity of Oil taken away from floating storage facilities would naturally be in the region of about 450 million barrels. With this, Currie estimates that oil stockpiles in onshore storage capabilities will naturally witness a radical decline by the fourth quarter of the year by about 400 million barrels.
Notwithstanding, some other experts maintain that a profound rebound in oil prices is most unlikely to happen anytime soon as such a rebound “ would be unattainable” in the present situation. This position sits pretty well with Goldman Sachs Jeffrey Currie. According to Goldman Sachs Currie “ if Brent rises above $30 a barrel it would spur a rebound in production, implying a rebound in supply, and a rebound in supply will immediately pressure prices yet again.”
Energy experts insist that given the fact that demand and supply are the two key variables in the delicate oil chess game with demand now occupying the key determinant role position as far as oil prices are concerned, the stark reality is that “ demand will likely remain depressed throughout the year.”
Currie added: “Now, demand is about 19 million BPD below pre-crisis levels. While this demand has started to improve, it would still be down by 17 million BPD from pre-crisis demand this month and by 12 million barrels in June and July. By August, things will be looking up, with demand at 5-6 million BPD below pre-crisis levels.”
Recall also that The New Diplomat had recently projected that with the escalating glut in oil supplies and stretched storage capabilities, exacerbated by Saudi Arabia’s increase in oil production even in the face of dwindling global demand, global energy experts had come up with a grim outlook that the world may be heading towards further oil price crash.
The consequent was that even at $12 per barrel, there were still no buyers for Nigeria’s Oil at the international oil market For Nigeria, Africa’s most populous nation, whose externally generated revenue projected at about 97% external earnings from oil trade, the grim outlook was further compounded by the recent downgrading of the country’s credit rating from stable to negative by Standard & Poor (S&P).