How Would a 2nd Lockdown Affect Oil Prices?

Wood Mackenzie’s (WoodMac) Brent oil price forecast would be significantly affected in a second lockdown wave scenario, an opinion piece posted on the company’s website by WoodMac’s director of Americas gas and LNG research, Dulles Wang, has revealed.

Wang outlined that the company’s base case forecast anticipates an oil price rebound as demand starts rising post coronavirus. He noted, however, that a second large-scale lockdown would further exacerbate the economic recession in 2020 and delay a GDP rebound until 2022.  

In WoodMac’s base case forecast, Brent rises to an average of $86 per barrel in 2030. In a second wave scenario, WoodMac projects that Brent will hit $70 per barrel in 2030, according to Wang.

“The coronavirus pandemic has already had far-reaching consequences for energy demand,” Wang stated in the opinion piece, which was published on Tuesday.

“Lockdown measures around the world saw businesses shuttered and freedom of movement severely restricted. The impact on consumption of oil, gas and power was immediate,” he added.

“Now, with the number of new coronavirus cases rising, the risk of a second wave of lockdowns is mounting, and with it the risk of an even deeper global recession,” Wang continued.

As of August 16, there have been 21.2 million confirmed cases of Covid-19, with 761,779 deaths, according to the latest situation report data from the World Health Organization (WHO).

In its latest weekly epidemiological update, which was released on August 17, WHO noted that in the past seven days, the number of reported daily cases “rapidly increased” with an average of 260,000 cases and 5,500 deaths.

Last month, Rystad Energy forecasted that oil demand in 2020 could lose an additional 2.5 million barrels per day in a second Covid-19 wave scenario. The company outlined at the time that a second wave of the pandemic was already “increasingly apparent” in several countries.

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