Oil Prices Under Pressure
Oil prices are under pressure all along the forward curve.
That’s according to a recent report from Standard Chartered, in which analysts noted that the trend in coronavirus infections and the associated tightening of lockdowns in many countries, along with weak oil market data and resumed Libyan exports, are “powerful downforces”.
In the report, which was sent to Rigzone late Wednesday, analysts at Standard Chartered highlighted that they see significant downside risk for short-term prices. The analysts also outlined that weakness in longer-term prices has received less attention, but appears symptomatic of a market beginning to worry about the potential for peak demand, the effect of energy transitions and that economic and oil demand implications of the pandemic will extend several years into the future.
“The five-year Brent crude price reached a 15-year low of $46.27 per barrel on March 20, and then recovered to $53.85 per barrel by end-August,” the analysts stated in the report.
“However, the back of the curve has fallen sharply over the past two months, taking the five-year price below $48 per barrel at the time of writing, less than $2 per barrel above the 15-year low. The market seems to be losing confidence in longer-term demand and is intent on creating an increased disincentive for investment in future capacity, in our view,” the analysts added in the report.
A chart shown in Standard Chartered’s latest report shows that the five-year Brent crude price did not drop below $55 per barrel from 2018 until the beginning of 2020, when it was shown to have plunged by several dollars. The chart only showed data from 2018 to the current month.
At the time of writing, the price of Brent crude stood at $38.22 per barrel. At the beginning of the week, Brent was trading at over $41 per barrel.
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