By Peter Nurse
Investing.com - Oil markets mostly lower Tuesday, overturning early strong gains, with market participants still spooked by the collapse in fuel demand resulting from the shutdown of vast areas of the global economy.
AT 9:15 AM ET (1315 GMT), U.S. crude futures traded 0.2% lower at $28.95 a barrel, vacillating around the gain line for the day, while the international benchmark Brent contract fell 1.8% to $29.52.
Late Monday, U.S. President Donald Trump warned of a likely recession and a lengthy disruption caused by the measures to combat the coronavirus outbreak. With airlines cutting flights, mass gatherings of all sorts being discouraged and a growing number of countries going into lockdown, demand for fuel is facing an unprecedented hit.
Oslo-based Rystad Energy has released updated estimates for global fuel demand as a result of the impact of coronavirus on world energy markets.
The energy research and business intelligence firm is now forecasting oil demand will fall by 600,000 barrels per day year-on-year, equivalent to a decrease of 0.6%. The company’s estimates total oil demand in 2020 will fall to 99.2 million b/d, from some 99.8 million b/d in 2019.
“Demand losses across the complex are now unprecedented,” Jeff Currie, head of commodities research at Goldman Sachs (NYSE:GS), wrote in a report, saying oil consumption is now down by 8 million barrels a day.
The bank said it expects West Texas Intermediate to trade higher than Brent this quarter, and cut its Brent forecast for the second quarter to $20 a barrel.
The slump in demand is coinciding with a flood of supply as Saudi Arabia and Russia engage in a price war for market share.
The drop in prices could result in the developing countries’ oil and gas income falling to their lowest levels in more than two decades if current energy market conditions persist, the IEA and OPEC have warned in a rare joint statement.
IEA Executive Director Fatih Birol and OPEC Secretary General Mohammed Barkindo expressed “deep concerns” about the coronavirus pandemic on Monday, warning it could have “potentially far-reaching economic and social consequences.”
Birol and Barkindo said they expect developing countries to see their oil and gas income fall by 50% to 85% in 2020.
In the corporate space, Exxon Mobil (NYSE:XOM) said it's looking at cutting capital expenditure this year after Standard & Poor's cut its debt rating to AA from AA+ on Monday. Reuters reported meanwhile that Chesapeake Energy (NYSE:CHK), a pioneer in the shale sector, has appointed advisers for a possible debt restructuring.