Oil prices have slipped to 17-year lows as a result of the announcement by President Trump to extend the social distancing guidelines until April 30 and further denting oil demand expectations for April and beyond.
WTI traded briefly below the $20 mark at the open of Asian trading on Sunday, while Brent futures are trading just long of the $23 mark at the time of writing.
The losses in oil demand are by far a more important price driver than the Saudi-Russia price war debacle, outsizing the 2-3 million bpd supply increase from OPEC+ by a factor of 4-5. To make matters worse, we expect to see further downwards revision to our 16 million bpd oil demand loss estimate for April.
The oil market supply chains are broken due to the unbelievably large losses in oil demand, forcing all available alternatives of supply chain adjustments to take place during April and May: Onshore product storage surge, refinery run rate cuts globally, massive increase in floating storage deals and upstream supply shut-ins.