Oil Prices Rebound, Analyst Says Market Faces Tsunami Of Surplus

Oil prices have started to rebound and one analyst warned Thursday that the market is standing on the shore and facing a tsunami of oil surplus in April. 

On Wednesday, the price of oil fell to an 18-year low. WTI crude fell as much as 26% to $20.06 as the spread of the coronavirus triggered further panic in the markets.

“The price rebound this morning (19 March) is just a brief relief before it goes lower,” Bjarne Schieldrop, chief commodities analyst at SEB, said in a Thursday note.

“While the spreading of the virus has further to go and oil prices further to drop, we are now probably getting very close to peak fear in western and global financial markets."

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OPEC Price War Fading?

The Saudi-Russia price war is now starting to fade into the background as the global demand shock takes center stage, the analyst said. 

The surplus will crush oil prices to much lower levels unless OPEC turns around 180 degrees and initiates massive cuts to counter the evolving demand plunge, he said. 

“Saudi Arabia and Russia are now producing at ‘over-kill’ in the middle of a demand shock. It is not possible to maintain such levels for very long or beyond Q2 2020, and they are likely going to ease back to only ‘kill’ levels in May/June 2020.” 

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