Oil Analyst Expects Rise In Demand Later In 2020, Says V-Shaped Recovery 'Less Certain'

Oil prices are expected to make a sharp V-shaped rebound in the second half of 2020, but the sentiment is muted but for now as the COVID-19 pandemic continues to spread, according to one analyst. 

Last week, the Organization of the Petroleum Exporting Countries plus group, which includes Russia and Saudi Arabia, made a historic deal and agreed to reduce oil output by 9.7 million bpd per day for May and June.

Brent crude was trading 1.19% higher at $28.02 per barrel and WTI Crude was down 0.96% at $19.68 at the time of publication Thursday. 

Analyst 'Less Certain' Of V-Shaped Oil Recovery 

The OPEC+ production cuts will not prevent surplus global oil inventory in May and June, Bjarne Schieldrop, chief commodities analyst at SEB, said in a note. 

"But together with natural declines in the U.S. and elsewhere will help to clean up the inventory mess over time — but how quickly is the question?” 

Schieldrop said he expects optimism for a V-shaped oil recovery in the second half of 2020 to fall. 

The general view seems to be that the global economic trough and the oil demand trough will be April 2020, followed by a sharp V-shaped rebound, the analyst said. 

"It is highly likely that the trough is indeed going to be in April/May 2020 or at least in Q2 2020, but we are less certain about the V-shaped rebound in global oil demand following the trough. COVID-19 is still ahead of us, so the road to oil demand normality may be much more muted than V-shaped."

Lockdown Will Gradually Be Lifted

The global lockdown is also impacting the price of oil. 

“Rather than moving from ‘deep-freeze lock-down’ in Q2 2020 and then directly to ‘all-back-to-work’ in Q3 2020, we are more likely going to move to ‘semi-lock-down’ as well as repeated ‘stop-start’ moves as governments try to ease restrictions but then pull back again as infection rates revive,” Schieldrop said. 

USO Price Action

The United States Oil Fund LP was down 3.16% to $4.29 at the time of publication Thursday. 

Related Link: OPEC+ Agrees To Historic Deal To Cut Oil Production