Citi Doesn't See Oil Revival From Virus Until Fourth Quarter
Added 02-03-20 01:04:03am EST - “(Bloomberg) -- Citigroup Inc. slashed its price forecasts for commodities from oil to copper and iron ore as it said the impact of the coronavirus looks much worse than it initially thought.Oil came in for the most severe downgrades,…” - Finance.yahoo.com
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(Bloomberg) -- Citigroup Inc. slashed its price forecasts for commodities from oil to copper and iron ore as it said the impact of the coronavirus looks much worse than it initially thought.
Oil came in for the most severe downgrades, with the bank cutting estimates for the first three quarters. Citi also reduced its first-quarter copper projection by almost a fifth, noting the outbreak had “drastically shifted” the Chinese and global economic outlook, analysts including Ed Morse, wrote in a note.
Chinese government measures amount to a “major shutdown of the economy” and even with a deeper OPEC+ production cut it will drive weaker oil balances, Morse, the global head of commodities research, said in the note. “There would be critical knock-on indirect effects for all commodities.”
The lender slashed its first-quarter Brent oil estimate to $54 a barrel from $69. Reductions in projections for the following two quarters are based on its view the virus will have a longer and deeper impact than previously anticipated. It said the global crude benchmark could fall as low as $47 a barrel, which would be the weakest level in two and a half years.
Oil demand in the world’s biggest importer has dropped by around 3 million barrels a day, or 20% of total consumption, according to people with inside knowledge of the country’s energy industry. The Wuhan virus looks set to be the biggest demand shock for oil markets since the global financial crisis more than a decade ago, with OPEC+ considering an emergency meeting.
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