Oil could dip to $20.
In fact, that’s what Goldman Sachs just warned of after Saudi Arabia cut prices.
“The prognosis for the oil market is even more dire than in November 2014, when such a price war last started, as it comes to a head with the significant collapse in oil demand due to the coronavirus. This is the equivalent of a 1Q09 demand shock amid a 2Q15 OPEC production surge for a likely 1Q16 price outcome,” Goldman Sachs oil strategist Damien Courvalin said, as quoted by Yahoo Finance.
“This completely changes the outlook for the oil and gas markets, in our view, and brings back the playbook of the New Oil Order, with low cost producers increasing supply from their spare capacity to force higher cost producers to reduce output.”
All thanks to a new oil price war between OPEC and Russia.
With Russia’s unwillingness to cut its output, the Saudis are preparing to open the spigots.
Reportedly, Russia is refusing to go along with OPEC’s proposal to rescue coronavirus-battered oil markets by cutting more production. Because of that, the Saudis cut its April oil selling prices to $8 with hopes this will bring Russia to the table.
If not, ″$20 oil in 2020 is coming,” Ali Khedery, CEO of U.S.-based strategy firm Dragoman Ventures, as quoted by CNBC. “Huge geopolitical implications. Timely stimulus for net consumers. Catastrophic for failed/failing petro-kleptocracies Iraq, Iran, etc – may prove existential 1-2 punch when paired with COVID19.”
Crude oil is now down to $32.44 after losing another 8.84.
As a result, major oil stocks are down. Exxon Mobil (XOM) for example just fell another $7.71 this morning. Chevron (CVX) fell $15. Hess (HESS) just fell $11.72. All are being avoided as the oil price war begins to take shape.
