Macro Oils short-term outlook May 2020 Report

Commodity Market Report 01 May 2020

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Report summary

What a month it has been. A lot has changed since our 30 March 2020 Monthly Update including wider implementation of coronavirus containment measures and a dramatic OPEC+ meeting that concluded 12 April 2020. But for all the changes, our price forecast for Brent remains largely the same. The OPEC+ deal production cuts take effect 1 May and we expect a shift in the oversupplied market to start this month and continue during June. The updated forecast continues to show that oil demand was at its lowest point in April, while OPEC production falls sharply this month. Highlights of our Macro Oils short term outlook include: • Our updated short-term macroeconomic forecast and a downward revision to demand • Implementation of the new OPEC+ cuts and if we expect full compliance • Our latest assessment of US Lower 48 production and the impact of shut-ins and frac holidays • The US storage situation and other aspects of global storage

Global liquids supply: production shut-ins begin to bite into oversupply
- OPEC: radical shift in production outlook as landmark agreement reached
- Non-OPEC supply: between a cut and a hard place
- OPEC+ cuts: Russia and the Caspian lead the way
- US Lower 48: cuts, deferrals and shut-ins
Global liquids demand: 2020 demand falls to 7-year lows amid post-pandemic economic contraction in Q3, Q4 2020
- Growing scale and duration of Covid-19 impacts drop Q2 demand to 11-year lows
- Demand outlook by region
- Downside risk remains, but progress on Covid-19 vaccine/therapeutics presents upside risk