Fitch Ratings has lowered Thursday its oil price forecast for 2020 and 2021 due to spread of coronavirus (Covid-19) and growing crude oversupply in the world.
The rapid spread of coronavirus around the world has weakened the global economic outlook and oil demand in the short-term, resulting in 'very large oversupply', the global rating agency said in a statement.
'The oil market is under pressure from both shrinking demand and growing supply. Much lower economic activity due to the unprecedented lockdowns in much of Europe, the U.S. and many other countries is significantly reducing oil consumption,' the statement said.
'We expect demand to fall by several million barrels per day in 2020 compared with 2019. Jet fuel and gasoline, which represent 35% of global oil consumption, will be most affected by the lockdowns,' it added.
Fitch said OPEC+ countries failing to agree on oil production cuts means that OPEC members have removed their previous output quotas from the month of April onward, which will result in increasing supply.
'Saudi Arabia, which has spare capacity of at least two million barrels per day (bpd), intends to maximize production. We estimate that overall OPEC production could grow by about 3 million bpd in the short term,' it said.
The rating agency now expects the price of Brent crude to average $35 per barrel this year, down from its previous estimate of $41 a barrel. The international benchmark is forecast to average $45 a barrel in 2021, down from the previous estimate of $48 per barrel.
American benchmark West Texas Intermediate (WTI) is anticipated to average $32 a barrel in 2020, down from $38 per barrel, and it is forecast to average $42 a barrel next year, down from $45 per barrel.
By Ovunc Kutlu