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Oil demand to drop by 18.7 mbpd in April due to Coronavirus: Goldman Sachs

Goldman Sachs expects oil demand to drop by 10.5 mbpd in March and by a whopping 18.7 mbpd in April in the wake of the global Coronavirus shutdown
New Delhi: Goldman Sachs has said in a report that it expects oil demand to drop by 10.5 million barrels per day (bpd) in March and by a whopping 18.7 million bpd in April in the wake of the global shutdown to contain the spread of Coronavirus. “A demand shock of this magnitude will overwhelm any supply response including any potential core-Organisation of the Petroleum Exporting Countries output freeze or cut,” the investment bank said in a note dated March 25.

Goldman Sachs: Hit on production due to Coronavirus won’t be reversed quickly

“The scale of the demand collapse will require a large amount of production to be shut-in, of potential several million barrels per day,” Goldman Sachs said and added that the hit on production because of the shutdown imposed in the wake of Coronavirus outbreak will not likely be reversed quickly. Refineries across the world have cut down operations as the spread of Coronavirus and the subsequent lockdown has led to a steep drop in the fuel demand in both the automobile and the aviation sector.

‘Rebound in prices will be much sharper’

“Net, while we expect a further sharp sell-off in oil prices in the coming weeks, we increasingly see risks that the rebound in prices will be much sharper than our base-case rally back to $40 per barrel Brent by the fourth quarter of 2020,” Goldman Sachs said. The note comes as oil prices dropped on Thursday following three days of gains, as travel bans worldwide to contain Coronavirus dealt a blow to demand and overshadowed expectations that a US $2 trillion emergency stimulus will bolster economic activity.